2020 AnnuAl RepoRt
Corporate
Headquarters
LeMaitre Vascular, Inc.
63 Second Avenue
Burlington, MA 01803
USA
Tel: +1-781-221-2266
Fax: +1-781-425-5049
European
Headquarters
LeMaitre Vascular GmbH
Otto-Volger-Str. 5a/b
65843 Sulzbach/Ts.
Germany
Tel: +49-(0)6196-659230
Fax: +49-(0)6196-527072
LeMaitre Vascular Sinagapore, Pte. Ltd.
Asia-Pacific
Headquarters
138 Robinson Road
#12-02 Oxley Tower
068906, Singapore
Tel: +65 6813 0281
www.lemaitre.com
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2020
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
Common stock, $0.01 par value per share
Trading symbol
LMAT
Securities registered pursuant to Section 12(g) of the Act: None
Name of exchange on which registered
The Nasdaq Global Market
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes: ☐ No: ☒
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: ☒
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: ☒ No: ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or
emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company”
in Rule12b-2 of the Exchange Act.
Large accelerated filer ☐ Accelerated filer ☒ Non-accelerated filer ☐ Smaller reporting company ☐ Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any
new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by checkmark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal
control over financial reporting under section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting form that prepared or
issued its audit report. ☒
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes: ☐ No: ☒
The aggregate market value of the voting and non-voting common stock held by non-affiliates of the registrant was $289,244,419 computed by reference
to the last reported sale price of $26.40 per share as reported by The Nasdaq Global Market as of the last business day of the registrant’s most recently
completed second fiscal quarter. 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, 2021, the registrant had 20,527,451 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.
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LEMAITRE VASCULAR
2020 ANNUAL REPORT ON FORM 10-K
TABLE OF CONTENTS
PART I
Business .....................................................................................................................................................
Item 1.
1
Item 1A. Risk Factors ............................................................................................................................................... 18
Item 1B. Unresolved Staff Comments ...................................................................................................................... 34
Properties ................................................................................................................................................... 34
Item 2.
Legal Proceedings ...................................................................................................................................... 34
Item 3.
Mine Safety Disclosures ............................................................................................................................. 34
Item 4.
PART II
Item 5.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities ............................................................................................................................................... 35
Selected Financial Data .............................................................................................................................. 37
Item 6.
Management’s Discussion and Analysis of Financial Condition and Results of Operations ..................... 37
Item 7.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk ................................................................... 51
Financial Statements and Supplementary Data .......................................................................................... 52
Item 8.
Changes In and Disagreements With Accountants on Accounting and Financial Disclosure .................... 52
Item 9.
Item 9A. Controls and Procedures ............................................................................................................................. 53
Item 9B. Other Information ....................................................................................................................................... 55
PART III
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
PART IV
Directors, Executive Officers and Corporate Governance ......................................................................... 55
Executive Compensation ............................................................................................................................ 55
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters ... 55
Certain Relationships and Related Transactions, and Director Independence ........................................... 56
Principal Accounting Fees and Services .................................................................................................... 56
Item 15.
Item 16.
Exhibits and Financial Statements Schedules ............................................................................................ 56
Form 10-K Summary ................................................................................................................................. 60
SIGNATURES .................................................................................................................................................................... 61
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PART I
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K contains forward-looking statements (within the meaning of the U.S. Private
Securities Litigation Reform Act of 1995) that involve substantial risks and uncertainties, particularly risks related to the
regulatory environment, our common stock, fluctuations in our quarterly and annual results, our ability to successfully integrate
acquisitions into our business, and risks related to our business and industry generally, such as risks inherent in the process of
developing and commercializing products and services that are safe and effective for use in the peripheral vascular disease
market. All statements, other than statements of historical facts, included in this report 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. No forward-looking statement can be
guaranteed and actual results may vary materially from those projected in the forward-looking statements. We intend to take
advantage of the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995 regarding our forward-looking
statements, and are including this sentence for the express purpose of enabling us to use the protections of the safe harbor with
respect to all forward-looking statements. These risks and uncertainties include, but are not limited to: the status of our global
regulatory approvals and compliance with foreign regulatory requirements to market and sell our products outside the United
States; the duration of the lapse in CE mark approval for certain of our devices; the closure of an audit by one of our notified
bodies in support of the issuance and/or maintenance of CE marks covering certain of our products or the failure of such audit
to be successfully closed; the risk of significant fluctuations in our quarterly and annual results due to numerous factors; the
risk that assumptions about the market for the Company’s products and the productivity of the Company’s direct sales force
and distributors may not be correct; the risk that we may not be able to maintain our recent levels of profitability; the risk that
the Company may not realize the anticipated benefits of its strategic activities; risks related to the integration of acquisition
targets; the acceleration or deceleration of product growth rates; risks related to product demand and market acceptance of the
Company’s products and pricing; the risk that a recall of our products could result in significant costs or negative publicity; the
risk that the Company is not successful in transitioning to a direct-selling model in new geographies.
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, Artegraft, Cardial, CardioCel, Dialine, Eze-Sit, Glow ‘N Tell,
InvisiGrip, LeverEdge, LifeSpan, MollRing Cutter, Omniflow, ProcCol, Pruitt, Pruitt F3, Pruitt-Inahara, Python, RestoreFlow,
Syntel, VascuCel, VascuTape, TRIVEX, Wovex, XenoSure, and the LeMaitre Vascular logo are registered trademarks of
LeMaitre Vascular or one of its subsidiaries, and AlboSure, Chevalier, DuraSure, EndoRE, Flexcel, MultiTASC, Periscope,
and PeriVu 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. Solely for convenience,
trademarks and trade names referred to in this report may appear without the ® or TM symbols.
Item 1. Business
Overview
LeMaitre Vascular is a global provider of medical devices and human tissue cryopreservation services largely used in the
treatment of peripheral vascular disease, end-stage renal disease, and to a lesser extent cardiovascular disease. We develop,
manufacture, and market vascular devices to address the needs of vascular surgeons and, to a lesser extent, other specialties
such as cardiac surgeons, general surgeons and neurosurgeons. Our diversified portfolio of 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
LeMaitre valvulotome, the XenoSure biologic patch, the Artegraft collagen vascular graft, the Pruitt F3 carotid shunt,
1
VascuTape radiopaque tape, and Syntel embolectomy catheters. Our principal product offerings are sold throughout the world,
primarily in the United States, Europe, the United Kingdom, Canada and Asia/Pacific Rim. We estimate that the annual
worldwide market for our core product lines is approximately $900 million.
We sell our products and services primarily through a direct sales force. As of December 31, 2020 our sales force was
comprised of 80 sales representatives in North America, Europe and Asia/Pacific Rim, including two export managers. Our
worldwide headquarters is located in Burlington, Massachusetts, and we also have North American sales offices in Chandler,
Arizona and Vaughan, Canada. Our European headquarters is located in Sulzbach, Germany, with additional European sales
offices in Milan, Italy; Madrid, Spain; and Hereford, England. Our Asia/Pacific Rim headquarters is located in Singapore, with
additional Asia/Pacific Rim sales offices in Tokyo, Japan; Shanghai, China; and Kensington, Australia. During the years ended
December 31, 2020 and 2019, approximately 95% and 94%, respectively, of our net sales were generated in territories in which
we employ direct sales representatives. We sell our products in other countries through distributors.
Since March 2020, the COVID-19 pandemic has significantly impacted the markets into which we sell devices, our sales
and our operations. In response to COVID-19, many hospitals have limited elective procedures, and many of our devices are
used in elective procedures. Additionally, our sales representatives’ access to hospitals and surgeons has been restricted by
hospitals or local governments. In areas where the COVID-19 pandemic has materially abated, we have begun to see
restrictions eased. During 2020, these dynamics resulted in, and we expect will continue to result in, variable sales. In response
to the COVID-19 pandemic, we have modified our manufacturing operations in order to adhere to social distancing
requirements dictated by local law. In Q2 2020 we also undertook measures to reduce our operating costs, including temporary
base salary cuts and a reduction in force of approximately 13% of our full-time employees. However, as sales have normalized,
we have been rehiring personnel in many areas. We ended our temporary base salary cuts on August 31, 2020.
The Peripheral Vascular Disease Market
Based on industry statistics, we estimate that peripheral vascular disease affects more than 200 million people worldwide
and that the annual worldwide market for all peripheral vascular devices exceeds $5 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, and also includes other conditions, such as diabetes,
which is caused by kidney failure. 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 using higher-priced endovascular devices, and the adoption of western healthcare standards in the developing world.
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. We believe that our strong brands, established sales force, 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.
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 17,000 vascular surgeons worldwide, including 2,800
board-certified vascular surgeons and several thousand general surgeons who perform vascular procedures in the United States,
as well as more than 3,000 vascular surgeons in Europe and Asia/Pacific Rim. In contrast to other specialists, such as
interventional cardiologists and interventional radiologists, vascular surgeons perform both open vascular surgeries and
endovascular procedures. 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. We estimate that in 2020, over 90% 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 2020 approximately 80% of our sales were to hospitals for use by vascular surgeons.
As vascular surgeons are typically positioned to perform both open vascular surgeries and endovascular
2
procedures, we sell devices in both the open and endovascular markets to the same end user. More recently we
have begun to explore adjacent market customers, or non-vascular surgeon customers, who can be served by our
vascular device technologies, such as cardiac surgeons and neurosurgeons.
• Low rivalry niche segments. We seek to build and maintain leading positions in niche product and services
segments, which we define as under $200 million in annual worldwide revenue. We believe that the relative lack of
competitive focus on these segments by larger competitors, as well as the differentiated features and consistent
quality of our products, enable higher selling prices and market share gains. We have, however, also sought to sell
complementary offerings into larger, more competitive market segments, particularly when we believe that our
offerings in those segments are highly differentiated, such as the Artegraft collagen vascular graft, Omniflow II
biosynthetic graft, or the RestoreFlow human tissue cryopreservation services.
• Direct sales force expansion, and the addition of complementary products through acquisitions and to a lesser
extent research and development. We sell our products primarily through a direct sales force in North America,
Europe and Asia/Pacific Rim. Since 1998, we have built our sales force from zero to 80 direct sales
representatives, including two export managers. Prior to Covid-19, we hit a high water mark of 112 direct sales
representatives in 2019. 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 sell our products through distributors. For the
year ended December 31, 2020, approximately 95% 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, mostly through acquisitions. We
believe our experience 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 and select other markets.
Acquisition History
We were founded in 1983 by George D. LeMaitre, M.D., a vascular surgeon who designed and developed the LeMaitre
Valvulotome. Through a combination of complementary acquisitions and research and development efforts, we have expanded
to 16 product lines. We have completed 24 acquisitions since 1998:
Year
1998
1999
2001
2003
2004
2005
2007
2007
2007
2007
2010
2012
2013
2013
2014
2014
2015
2016
2016
2018
2018
2019
2019
2020
Acquisition
Whittaker Screen Printing
Vermed
Ideas for Medicine
Credent
VCS Clip
Endomed
Vascular Innovations
Vascular Architects
UnBalloon
Biomateriali
LifeSpan
XenoSure
Clinical Instruments
TRIVEX
Xenotis Pty Ltd
PeriVu
Eze-Sit OUS
ProCol
RestoreFlow
Syntel
Cardial
Eze-Sit US
CardioCel
Artegraft
Key Product(s) and Services
Radiopaque tape manufacturing operations
Embolectomy catheters
Carotid shunts, balloon catheters, and laparoscopic cholecystectomy devices
Polycarbonate grafts
Vessel closure systems
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
Angioscopes
Valve cutters
Biologic grafts
Human tissue cryopreservation services
Embolectomy catheters
Polyester grafts, valve cutters, surgical glue
Valve cutters
Biologic patches
Biologic grafts
3
We manufacture most of our devices in-house, having relocated the manufacturing operations of 19 of our 24
acquisitions to our Burlington, Massachusetts headquarters, and we continue to look at ways to make our operations more
efficient. The human tissue processing and cryopreservation operations associated with RestoreFlow allografts take place in
our Fox River Grove, Illinois facility. The manufacture of our Cardial devices takes place in our Saint-Etienne, France facility.
The manufacture of our recently acquired Artegraft biologic grafts takes place in North Brunswick, New Jersey. On a limited
basis, we use third party manufacturers: Specifically, we purchase remote endarterectomy devices and TRIVEX systems from
third parties. We also purchase our CardioCel and VascuCel patches from Anteris Technologies Ltd (formerly Admedus Ltd)
in Malaga, Australia.
Our Products and Services
We have a portfolio of 16 product offerings, most of which treat vascular disease, and most of which are used in open
vascular surgery and dialysis access, and one of which is a service related to the processing and cryopreservation of human
vascular tissue.
Our 16 product offerings include seven that are biologic implants, and one that is a service of processing and
cryopreserving human tissue for implantation. These offerings include the XenoSure patch (bovine pericardium), CardioCel
and VascuCel patches (bovine pericardium), ProCol graft (bovine mesenteric vein), Artegraft (bovine carotid artery),
Omniflow II biosynthetic graft (ovine tissue and synthetic mesh), surgical glue (porcine gelatin) and the RestoreFlow Allograft
cryopreserved graft (human cadaver tissue). These biologic product lines represented 43% of our sales in 2020, 35% in 2019,
and 36% in 2018. No single product line accounted for more than 20% of our revenues in 2020, 2019 or 2018.
Allografts
Through our RestoreFlow allograft business, we provide human cadaver tissue cryopreservation services, in particular
the processing and cryopreservation of veins and arteries. Our RestoreFlow allografts are cryopreserved human tissue grafts,
including saphenous veins, femoral veins and arteries, aortic and iliac arteries, aortic and pulmonary valved conduits and
pulmonary patches. These allografts are used in a variety of vascular reconstructions such as peripheral bypass, hemodialysis
access, and aortic infections. Currently we offer these cryopreservation services in the United States and Canada.
Angioscopes
The PeriVu Disposable Angioscope is a fiberoptic catheter used for viewing the lumen of a blood vessel. PeriVu also
provides direct visualization of valves during in-situ bypass procedures.
Balloon Catheters for Embolectomy and Thrombectomy
Our TufTex and Syntel lines of embolectomy catheters are used to remove blood clots from arteries or veins. We sell
single-lumen latex and latex-free embolectomy catheters as well as dual-lumen latex and latex-free embolectomy catheters.
The dual-lumen embolectomy catheters enable clot removal and simultaneous irrigation or guide-wire trackability. Our Syntel
thrombectomy catheter features a silicone balloon and is designed for removing thrombi in the venous system.
Balloon Catheters for Occlusion and Perfusion
Occlusion catheters temporarily occlude blood flow to allow the surgeon time and space to complete a procedure.
Perfusion catheters 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.
Bovine Grafts
Our ProCol biologic graft is a bovine mesenteric vein used for dialysis access in patients with a previously-failed
synthetic graft. Our Artegraft biologic graft is a bovine carotid artery used for dialysis access in patients with or without a
previously-failed synthetic graft. Its biological fibrous matrix is processed to enhance long-term patency and provide a tightly
woven, cross-linked conduit that is flexible and compliant. Artegraft is also indicated for lower extremity bypass. Currently we
distribute these two bovine grafts only in the United States.
4
Vascular and Cardiac Patches
Our XenoSure biologic patches are made from bovine pericardium, and are used primarily for closure of vessels after
surgical intervention. Our AlboSure Vascular Patch is a polyester patch used primarily for vessel closure after surgical
intervention.
Our VascuCel and CardioCel biologic patches are acellular, collagen bioscaffolds with optimized biocompatibility and
zero aldehyde toxicity. These patches are used in vessel repair as well as heart repair and reconstruction, including neonatal
repairs.
Carotid Shunts
Our Pruitt F3, Pruitt F3-S and Flexcel carotid shunts are used to temporarily shunt blood to the brain while the surgeon
removes plaque in a carotid endarterectomy surgery. Our Pruitt F3 and Pruitt F3-S shunts feature internal balloon fixation
rather than traditional external clamp fixation, reducing vessel trauma. Our Flexcel shunt is a non-balloon shunt offered for
surgeons who prefer external clamp fixation.
Closure Systems
Our AnastoClip AC and AnastoClip GC closure systems attach vessels to one another with titanium clips instead of
sutures. These closure systems create an interrupted anastomosis that expands and contracts as the vessel pulses, which some
surgeons believe improves the durability of the anastomosis. The AnastoClip AC and AnastoClip GC closure systems also
facilitate compliant dura closure in neuro applications.
Ovine Vascular Grafts
Our Omniflow II biosynthetic vascular graft is a composite of cross-linked ovine collagen with a polyester mesh
endoskeleton. It is indicated for lower extremity bypass and dialysis access. This device is not available in the United States.
Polyester Vascular Grafts
Our AlboGraft, Wovex and Dialine II vascular grafts are collagen-impregnated polyester grafts used to bypass or replace
diseased arteries. These prostheses are available in straight tube and bifurcated versions.
ePTFE Vascular Grafts
Our LifeSpan ePTFE vascular graft is an expanded polytetrafluoroethylene (ePTFE) graft used to bypass or replace
diseased arteries and to create dialysis access sites. LifeSpan is 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 sometimes arise in dialysis access grafts.
Powered Phlebectomy
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, a resector, 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 a
proprietary radiopaque ink which is visible to the eye and an x-ray machine. VascuTape is applied 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.
5
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. Our EndoRE devices are used to dissect the plaque from the vessel, cut the far
end of the plaque to free it for removal, and then withdraw it from the vessel.
Surgical Glue
Our Cardial surgical glue is a biologic-based glue that is typically used for joining dissected vessel layers and reinforcing
sutures in cardiac and vascular procedures.
Valvulotomes
Our valvulotomes (or valve cutters) cut or disrupt valves in the saphenous vein, a vein that runs from the foot to the
groin, so the vein can be repurposed 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 lower extremity 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.
Sales and Marketing
As of December 31, 2020, we employed 80 field sales representatives, including two export managers. We believe the
expansion of our sales force since 1998 has been a key success factor, and it remains one of our primary long-term strategies.
Approximately 95% of net sales occurred in territories in which we employ field sales representatives. Outside our direct
markets, we generally sell our products through country-specific distributors.
Our marketing efforts include direct mail and exhibitions at medical congresses, which we believe are important to our
brand development. We believe that marketing allows us to reach vascular surgeons who are beyond the reach of our direct
sales force.
We also provide training to our vascular surgeons on specific procedures including in situ bypass, carotid
endarterectomy and interrupted anastomosis. More recently we initiated a general surgical skills training program targeted to
less-experienced doctors as a way to introduce them to our product offerings.
Research and Development
Our research and development activities have historically focused on product development, including developing
enhancements and extensions to our existing product lines; process engineering, including designing and optimizing our
manufacturing lines; and regulatory and clinical, including obtaining and maintaining regulatory approvals in various
geographies.
In 2018, our product development and process engineering efforts were primarily focused on expanding and enhancing
our biologic product lines including XenoSure and Omniflow II, and the integration of our ProCol manufacturing into our
Burlington facility. We also introduced quality-based improvements to the design of the LeMaitre Valvulotome as well as
TRIVEX. In 2019, our focus remained on biologic products, launching a biologic dural patch for use in neuro-surgery
procedures, and the transfer of Omniflow II and Syntel manufacturing into our Burlington facility. In addition, we undertook a
project to begin distribution of cardiac allografts for use in cardiac replacement and repair. We also continued development on
a next-generation powered phlebectomy system. In 2020 we continued our efforts with respect to the cardiac allograft and
next-generation powered phlebectomy projects as well as the manufacturing transfers, and also provided support to our
growing regulatory and clinical efforts. All of 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 cadaveric studies and
human clinical trials conducted by independent physicians, and post-market surveillance of product performance. We may use
feedback received from independent physicians to demonstrate product functionality before commencing full-scale marketing
of any product.
Our regulatory and clinical efforts have historically been focused on obtaining and maintaining regulatory approvals in
various geographies. In the past we have typically not conducted clinical trials as we have usually acquired product lines with
6
regulatory approvals already established. In addition, we preferred to avoid the time, expense and risk associated with initiating
clinical trials. However, increasing regulatory requirements in many geographies have resulted in the need for more clinical
testing. As such, this component of our research and development spending has increased in recent years. In 2017 we initiated
a clinical trial in an effort to obtain the approval of our XenoSure patch in China for cardiac and vascular indications. We have
completed enrollment of this trial, and we expect to make our cardiac submission to the Chinese National Medical Products
Administration (NMPA) in 2021 and for the vascular indication in 2022.
In 2017 the EU adopted new regulations for medical devices (MDR), which replace the European Medical Devices
Directive (93/42/EC as amended by 2007/47/EC) (MDD) and which apply after a transition period ending on May 26, 2021.
After this date, our MDD certificates then in effect will remain valid until their expiration dates, which range from December
2021 to May 2024. Our products will then be subject to the MDR, which require all of our products, regardless of
classification, to obtain a new CE mark in accordance with the new, more stringent standards. Going forward, we expect a
significant portion of our regulatory and clinical time and expenses to be devoted to this transition. See –“Government
Regulation” below for more information about the status of our MDD certificates.
Manufacturing and Processing
Our primary manufacturing facilities are located in Burlington, Massachusetts. We also have facilities in Saint-Etienne,
France where our Wovex and Dialine vascular grafts, Chevalier Valvulotome and surgical glue are produced, North
Brunswick, New Jersey where Artegraft is produced and Fox River Grove, Illinois where RestoreFlow allografts are processed,
cryopreserved, stored and distributed.
We eventually integrate manufacturing of most acquired lines into our Burlington operations. However, our EndoRE,
CardioCel and VascuCel products are currently manufactured by third parties. We renovated our biologic cleanroom in
Burlington in 2017, and in 2018 moved our ProCol biologic grafts into this space. In 2019 we expanded our biologic clean
room, and in 2020 transferred the manufacturing of Omniflow II into it. In 2018, we initiated a project to transfer the
manufacturing of the Syntel embolectomy business we acquired from Applied Medical, which we completed in 2020. In 2019
we leased a fifth Burlington building, which will allow continued expansion of our manufacturing footprint. We are currently
constructing another biologic clean room where we expect to manufacture CardioCel and VascuCel.
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 for our customers, 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 U.S. tissue procurement organizations. Donated
human tissue is procured from deceased donors by these organizations. We have strict specifications relating to 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 customer relationship management, order entry,
invoicing, on-line inventory management, lot traceability, purchasing, shop floor control, shipping and distribution analysis, as
well as various accounting-oriented functions. These systems enable us to track our products from order inception through
manufacturing and then through delivery to our customers.
We purchase certain 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, most notably the purchase of CardioCel and
VascuCel devices from Anteris in Malaga, Australia. While we do have a contractual arrangement with Anteris, we do not
have contractual arrangements with many of our suppliers and manufacturers, and we order our supplies and products on an as-
needed basis. There are relatively few, or in some cases no, alternative, validated sources for these supplies, products and
components. At any time, our suppliers could discontinue or become incapable of the manufacture or supply of these materials
on acceptable terms or otherwise. We do not ordinarily carry a significant inventory of these supplies, products and
7
components. Identifying and qualifying additional or replacement suppliers, if required, may not be accomplished quickly or at
all and could involve significant additional costs. To date, we have not experienced any significant supply disruptions from
existing sources of supplies, products and components, but there is no guarantee that we will not experience such disruptions in
the future.
Our Burlington and Saint-Etienne manufacturing facilities have been certified to ISO 13485 quality management system
standards, which enables us to satisfy certain regulatory requirements of the EU, 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 international regulatory requirements. See “Government Regulation” for further
information.
Competition
The segments in which our product lines compete are characterized by rapid 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 Baxter International, Inc., Boston Scientific Corporation,
Cardiovascular Systems, Inc., Medtronic, Becton, Dickinson and Company, CryoLife, Edwards Lifesciences Corporation,
Getinge, LifeNet Health, Terumo Medical Corporation, Silk Road Medical 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, sometimes our more technologically advanced products are sold at higher prices. We believe our
continued success may depend on our ability to broaden and optimize our direct sales channel, acquire or develop
complementary vascular devices, obtain regulatory and reimbursement approvals, maintain sufficient inventory, 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 most of our products
are used primarily in open vascular surgery. Our ability to compete effectively relies on keeping pace with product offerings in
the vascular device market, as well as in the minimally invasive endovascular market.
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 polyester and ePTFE vascular
grafts. Certain of these competitors may also have greater experience in developing and improving products, obtaining
regulatory approvals, and manufacturing and marketing such products. In the case of allografts, certain competitors may have
an advantage in sourcing tissue due to higher volume purchases and longer term relationships with tissue procurement
organizations. Additionally, some of our competitors may obtain patent protection or regulatory approval or clearance, or
achieve product commercialization before us, any of which could adversely affect our business.
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 trade secret laws, patents, trademarks and confidentiality and invention
assignment agreements to protect our intellectual property rights.
We maintain a limited portfolio of patents in the United States relating to various aspects of our products. The majority
of our issued U.S. patents are set to expire at various times from 2021 to 2031.
We manufacture, market, and sell our Periscope Dissector product pursuant to a license agreement with a third-party.
This arrangement requires us to pay a royalty, determined as a percentage of our net sales of this product. If we fail to make the
required payments or otherwise fail to observe the terms of this license agreement, we may lose our ability to sell these
products. We previously had similar license arrangements for our LifeSpan and TRIVEX product lines but these arrangements
ended in 2019. We believe that our brands have been an important factor in our success. We rely on common law and
registered trademarks to protect our brands. Some of our registered trademarks are LeMaitre, XenoSure, Pruitt, VascuTape,
Glow ‘N Tell and RestoreFlow, each of which is registered in the U.S, the EU, or both, and in certain cases in other foreign
countries.
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We rely on trade secret protection for certain unpatented aspects of other proprietary technology. Most of our products
are not protected by patents. Patent protection is not available when we acquire a commercialized product that is not patented,
such as the embolectomy catheters we acquired from Applied Medical in September 2018 and the product lines we acquired
from Becton, Dickinson in October 2018. 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. 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. 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 U.S. laws 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 U.S. 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 U.S. 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 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 12 months, but it can take longer. In reviewing
a premarket notification, the FDA may request additional information, including clinical data. Nearly all of our devices
currently sold in the U.S. are marketed pursuant to 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.
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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
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, 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 U.S. market using 510(k) clearance, and we have not used the
PMA process for any products that we currently market or sell in the U.S., other than our ProCol vascular graft, which had
PMA approval at the time we acquired the device. If we were to seek U.S. 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:
•
•
•
•
annual 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
10
•
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. The most recent FDA inspection of our Burlington facility was in August 2020, the results of which were
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.
International sales of medical devices manufactured in the U.S. that are not approved or cleared by the FDA for use in
the U.S., 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.
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 process human cells, tissues, and cellular
and tissue-based products. These FDA regulations also establish donor-eligibility criteria, 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 and our Burlington, Massachusetts facility are both
registered with the FDA’s Center for Biologics Evaluation and Research. 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 2018
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, 2024. Our Burlington, Massachusetts facility is also
accredited for the storage and distribution of tissue. The AATB is entitled to inspect accredited members at any time. The
AATB most recently inspected our Fox River Grove, Illinois facility in October 2020, and the results 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 reasonable payments associated with the removal, transportation,
implantation, processing, preservation, quality control, and storage of a human organ. We believe the compensation we receive
with respect to our 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
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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 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 an adverse effect on
our 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 have never been required 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.
International 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 EU 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 MDD), which is applicable to our products. Devices that comply with the requirements of the
MDD 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 EU, as well as the United Kingdom, Iceland,
Lichtenstein, Norway, Turkey and Switzerland. Each member state of the EU has implemented the directives into its respective
national law and has each established a “Competent Authority” to apply the directive in its territory.
The MDD classification system places devices into Class I, IIa, IIb, or III, depending on the risks and characteristics of
the medical device. The MDD also defines the essential requirements that devices must meet before being placed on the
market, establishes assessment procedures for approving a device, and creates mechanisms for Competent 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 device classification and other related factors.
A manufacturer of low-risk devices typically may demonstrate conformity 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 EU is generally required in order for a manufacturer to commercially
distribute the product throughout the EU. Most of our devices are considered higher-risk devices that require Notified Body
assessment.
EU medical device laws also address advertising and promotion of medical devices, clinical investigations, and
requirements for handling adverse events. Post-market surveillance of medical devices is generally conducted on a country-by-
country basis; however, the MDD 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 EU.
Our products are regulated in the EU under the European Medical Devices Directive (93/42/EC as amended by
2007/47/EC) (MDD). In order to market our medical devices in the EU, we are required to obtain CE mark certifications,
which denote conformity, and manufacturers of higher-risk devices generally must use a “Notified Body”—an appointed
independent third party to assess conformity. We have received CE mark certifications to sell nearly all of our products, though
currently there is a lapse in our CE mark certifications for some of our products due to one of our Notified Bodies abandoning
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all MDD services. On June 13, 2019, the Notified Body that issued the majority of our CE marks, Lloyd's Register Quality
Assurance or LRQA, notified its clients that it would cease providing all services relating to the MDD to all clients, including
us, as of September 12, 2019, subsequently extended to September 30, 2019. As a result, all LRQA-issued CE marks, unless
earlier transferred to a new Notified Body, would lapse as of that date. Prior to receipt of such notice, we had begun
transitioning most of our CE mark certifications to a new Notified Body, TUV SUD. However, TUV SUD was unable to
complete all work necessary to reissue our CE mark certifications by September 30, 2019. Under the MDD, only product
placed on the EU market prior to September 30, 2019 was eligible for sale. As a result, prior to September 30, 2019, we
manufactured and shipped inventory in amounts that for most products we believed would be sufficient to supply our EU
customers while we awaited reissuance of the CE marks by TUV SUD. TUV SUD issued CE mark certifications in February
2020 for many of our products, representing 37% of our 2020 EMEA sales, and in February 2021, we received a CE mark for
our LifeSpan ePTFE product from SGS, another one of our Notified Bodies. For some products for which CE marks have not
yet been reissued, we have continued selling product from our inventory reserves previously placed on the market in the EU.
We had believed those inventory reserves would be adequate to meet demand, but in some cases they have not been sufficient
due to the delay in the expected receipt of our CE mark certifications. We currently do not have valid CE marks for the
following products:
Product
XenoSure
AlboGraft
AnastoClips
Flexcel & Pruitt carotid shunts
AlboSure
Status
Expired/Partially Derogated
Expired/Partially Derogated
Expired
Expired
Expired
Notified Body
TUV SUD
TUV SUD
SGS
SGS
SGS
We have been engaged in a process with TUV SUD to obtain CE marks for XenoSure and AlboGraft since February
2019. We have answered a substantial number of questions related to those products, and we believe their review with respect
to those products will conclude by May 2021. TUV SUD, in Q4 2020 as part of the XenoSure/AlboGraft CE marking process,
also audited our Burlington facility, and that audit remains open. Approximately 60% of the findings in that audit have been
accepted by TUV SUD, and the Company is currently engaged in a dialog with TUV SUD to try to resolve the outstanding
findings. However, issuance of CE marks for XenoSure and AlboGraft depends in part on a successful audit closure as well as
approvals of the product-specific reviews. Together, XenoSure and AlboGraft accounted for 27% of EMEA sales in 2020.
Additionally, retention of our other CE marks representing 37% of our 2020 EMEA sales previously issued by TUV SUD
could also depend on a successful audit closure. There can be no assurance that TUV SUD will issue CE marks for these
products.
We currently expect that CE marks will be issued by SGS for the products AnastoClips, Flexcel shunts and Pruitt shunts
by May 2021. However, there can be no assurance that SGS will issue CE marks for these products. We believe it is unlikely
that SGS will issue a CE mark for AlboSure.
As a result of the CE mark lapses, we have begun experiencing backorders related to some of these products and our
revenues are being impacted. The backorders for these products approximated $0.2 million as of December 31, 2020. To
mitigate, in part, the impact of these backorders, we have sought exemptions, or derogations, in certain European countries
from the requirement to apply CE marking to XenoSure and AlboGraft on a temporary basis while we continue to seek
reissuance of CE marks by TUV SUD. We have received temporary authorization to sell XenoSure without a CE mark in 12
countries in Europe and AlboGraft in 13 countries in Europe, in each case subject to certain conditions and for limited time
periods, expiring as soon as April 22, 2021. If we are unsuccessful in obtaining or maintaining extensions for these temporary
authorizations or the reissuance of our CE marks for XenoSure or AlboGraft is materially delayed or withheld, our revenues
could be further impacted and our business could be harmed.
Additionally, the CE mark for our Omniflow II graft is currently being transferred to our Burlington headquarters due to
our discontinuation of operations in Melbourne, Australia in June 2020. If the transfer is not successful, the Omniflow II will
be subject to an MDR application process (see below). While the MDD CE mark would still remain valid for Australian-built
product, any new Burlington-produced units would not be allowed onto the European market until issuance of the MDR CE
mark. We expect that the inventory of the majority of such products held by our European subsidiary will only be sufficient to
supply our customers until Q2 2022, based on historical sales, and as a result, we may go into backorder for Omniflow II until
the MDR CE mark is issued. If the CE mark certification for Omniflow II is materially delayed or withheld, our European
revenues could be impacted and our business could be harmed.
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In April 2017, the EU adopted new regulations for medical devices (MDR), which replace the MDD and will apply
beginning May 26, 2021. Our products will be subject to the MDR, which requires all of our products, regardless of
classification, to obtain a new CE mark in accordance with the new, more stringent standards under the MDR. As a condition
to CE mark approval, clinical evidence from clinical investigations will be required for Class III and implantable devices. As
our Notified Bodies start to transition from MDD to MDR, they have begun to impose more rigorous requirements on us in
order to obtain approval to renew the CE marks on certain of our products. For example, we have been informed by BSI, our
Notified Body for the product lines manufactured in our Saint-Etienne, France facility, that they require more clinical data for
three of the four product lines for the continuance of the CE mark certifications and the upcoming MDR certifications for such
devices. Additionally, if CE marks are not issued for any or all of our products with lapsed marks before May 26, 2021, then
we will need to reinitiate the application process in its entirety under the MDR for any such lapsed product, a process that
could take up to two years for each product. If we fail to obtain new CE marks on these products or our other products under
the MDR in a timely manner, or at all, future sales of our products in the EU could be adversely impacted. We believe it is
unlikely BSI will re-issue a CE mark for our biologic glue product.
The United Kingdom left the EU on January 31, 2020, which is commonly referred to as “Brexit”. Pursuant to the formal
withdrawal arrangements agreed between the U.K. and the EU, the U.K. was subject to a transition period until December 31,
2020. After December 31, 2020, medical device manufacturers wishing to import their devices into the U.K. were provided a
transition period for registration of their devices until the end of 2021. The U.K. will continue to recognize CE marking
through June 2023 and thereafter, a separate marking will be required for devices. If our efforts to obtain new regulatory
approval in the U.K. is materially delayed or denied, we may be required to incur additional expenses in order to develop,
manufacture and commercialize our product candidates in the EU and our future sales may be impacted. We opened our
Hereford, England office in 2019 largely in response to Brexit.
In the event that any of our products proves to be defective, we can voluntarily recall, or the FDA or international
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 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 international 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. Higher
classification risk devices (Class III and IV) require filing dossiers that resemble US 510(k) applications. These applications
can range in cost and typically take longer for approval. As a holder of Canadian device licenses, we are subject to inspection
by HC at our Canadian office, and we must maintain a valid Medical Device Single Audit Program (MDSAP) certificate. Our
Canadian office was most recently inspected in August 2017, the results of which were satisfactory. Our Burlington office was
audited under the MDSAP in November 2020, and the auditing organization conducting the audit, TUV SUD, notified us of
their refusal to issue an MDSAP certificate on January 28, 2021. Our facility was subsequently reaudited by a different
auditing organization, SGS, in February 2021 under the MDSAP, the results of which were satisfactory. An MDSAP
certificate has not yet been issued to us by SGS; however we expect issuance of the MDSAP certificate in March 2021. If we
fail to receive the certificate in a timely manner, or at all, Health Canada may suspend or cancel our device licenses until
issuance of the certificate.
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. As a holder of Japanese device licenses, we are also subject to inspection by several Japanese
authorities including Japan’s Pharmaceutical and Medical Device Agency (PMDA), Tokyo Metropolitan Government (TMG),
and third parties such as Japan’s Electrical Safety & Environmental Technologies Laboratories (JET). Our Japanese office was
most recently inspected by JET in April 2020, the results of which were satisfactory.
Australia regulates the import and sale of medical devices through the Therapeutic Goods Administration (TGA). The
TGA has built its regulatory framework around requirements similar to those issued in Europe. As such, many medical devices
14
(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. As a holder of Australian device licenses, we are also subject to inspection by TGA in both Australia and the United
States. Our North Melbourne facility, where we previously manufactured our Omniflow II graft until we transferred
production to Burlington, was most recently inspected by TGA in December 2018, and our Burlington facility was inspected in
February 2021 under the MDSAP, the results of which were satisfactory. An MDSAP certificate has not yet been issued to us
by SGS; however we expect issuance of the MDSAP certificate in March 2021. If we fail to receive the certificate in a timely
manner, or at all, we would be subject to regular surveillance audits by all MDSAP jurisdictions, including Australia. Australia
requires all foreign manufacturers to have an in country ‘sponsor’ who must have a licensed business inside of Australia. Our
licenses are managed on our behalf by our sponsor, Emergo Group.
In China, the National Medical Products Administration (NMPA) 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 and Class III being
the highest risk. Home country approval, such as 510(k) or PMA clearance, is required as a prerequisite to any application.
Additionally, the NMPA often tests devices at its own testing laboratory to confirm each device’s specifications. The approval
process is typically lengthy and usually requires clinical trials. NMPA licenses are valid for five years from date of issuance
and require renewal prior to expiration. As a holder of Chinese device licenses, we are subject to inspection by NMPA in both
China and the United States. Our Shanghai offices were most recently inspected by NMPA in August 2018, the results of
which were satisfactory. The NMPA 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 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 U.S., 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, 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
15
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.
International
Our success in international 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 U.S., 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. There can be no assurance that reimbursement approval will be received.
U.S. Fraud and Abuse Laws
We may directly or indirectly be subject to various U.S. federal and state laws pertaining to healthcare fraud and abuse,
including anti-kickback laws. In particular, the U.S. 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 “safe harbors.” 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 safe harbors may result in increased scrutiny by government enforcement authorities,
such as the OIG.
U.S. 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). Under the PPACA we are subject to 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.
Employees and Human Capital Management
We had 403 employees, including 386 full-time employees, at December 31, 2020. Our full-time employees are
comprised functionally as follows: 216 manufacturing and operations, 114 sales and marketing, 38 general and administrative
and 18 research and development.
We strive to create a demanding and rewarding work environment by emphasizing teamwork and decentralized decision-
making. We are committed to providing equal employment and advancement opportunities to all individuals, and all
employment decisions are based on merit, qualifications, and abilities. LeMaitre Vascular does not discriminate in employment
opportunities or practices on the basis of race, color, religion, sex, national origin, age, disability, sexual orientation, gender
identity, breastfeeding or related medical conditions, religious dress, military or veteran status or any other characteristic
protected by law. This policy governs all aspects of employment, including selection, job assignment, compensation,
discipline, termination, and access to benefits and training.
16
We believe in providing competitive pay and benefits to all our employees. We utilize third party benchmark
compensation data to determine market wages. Our compensation is designed to attract, retain, and motivate employees to
achieve results while balancing short- and long-term company performance. We work with external benefits consultants to
evaluate the quality, competitiveness, and cost of our benefit offerings to our employees. In 2020, for example, we improved
the company match under our U.S. 401(K) plan.
We review the number of new hires every month to understand our ability to attract talent. We also review our voluntary
turnover to understand our ability to retain talent. In 2020, we hired 38 new employees and our world-wide voluntary
resignation rate was 8.4%.
COVID safety was a significant concern and focus for us in 2020. We have taken extensive measures to keep our
employees safe. We are following all COVID safety best practices including but not limited to requiring masks be worn at all
times, socially distanced workstations, hand sanitizer and soap available throughout our buildings, closed conference, break
and lunch rooms, and a voluntary work from home policy. We have also invested in Kinexon proximity sensors that help our
employees stay socially distanced at all times and allow us to contact trace effectively in the case of a positive diagnosis. Our
proximity sensors have been assigned to all employees who work in all our offices globally.
Customers
Our sales are not dependent on any single customer or distributor, and we continue to expand our distribution channel
worldwide through direct sales representatives and independent distributors. No single customer accounted for more than 2%
of our net sales in 2020.
Corporate Information
On October 19, 2006, we executed our initial public offering, and our common stock trades on The Nasdaq Global
Market under the symbol “LMAT.” In January 2021 we changed our brand name to “LeMaitre”. Our principal executive
offices are located at 63 Second Avenue, Burlington, Massachusetts 01803, and our telephone number is (781) 221-2266. Our
website address is www.lemaitre.com.
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). The address of the
SEC’s website is www.sec.gov. 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, and you
should not consider any information contained in, or that can be accessed through, our website as part of this Annual Report on
Form 10-K. The SEC maintains an internet site that contains reports, proxy and information statements and other information.
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.
17
Item 1A. Risk Factors
Investing in our securities involves a high degree of risk. You should carefully consider the following information about
the risks described below, together with the other information contained in this Report and in our other public filings in
evaluating our business. 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 Report 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
If we do not comply with international regulatory requirements to market our products outside the U.S., our business will be
harmed.
Sales of medical devices outside the U.S. 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 U.S. FDA.
In some cases, we rely on our international 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.
Our products are regulated in the European Union (EU) and the U.K. under the European Medical Devices Directive
(93/42/EC as amended by 2007/47/EC) (MDD). In order to market our medical devices in the EU, we are required to obtain
CE marks, which denote conformity to the essential requirements of the MDD, and manufacturers of higher-risk devices
generally must use a “Notified Body”—an appointed independent third party to assess conformity. We have received CE marks
to sell nearly all of our products, though currently there is a lapse in our CE marks for some of our products due to one of our
Notified Bodies abandoning all services related to the MDD. On June 13, 2019, the Notified Body that issued the majority of
our CE mark certifications, Lloyd's Register Quality Assurance or LRQA, notified its clients that it would cease providing all
Notified Body services relating to the MDD to all clients, including us, as of September 12, 2019, which date was subsequently
extended to September 30, 2019. As a result, all LRQA-issued CE marks, unless earlier transferred to a new Notified Body,
would lapse as of such date. Prior to receipt of such notice, we had begun transitioning our CE marks to a new Notified Body,
TUV SUD. However, TUV SUD was unable to complete all work necessary to reissue our CE marks by September 30, 2019.
Under the MDD, only product placed on the European market prior to September 30, 2019 was eligible for sale to EU
countries. As a result, prior to September 30, 2019, we manufactured and shipped inventory in amounts that for most products
we believed would be sufficient to supply our EU customers while we awaited reissuance of the CE marks by TUV SUD. In
February 2020, TUV SUD issued CE marks for many of our products, representing 37% of our 2020 EMEA sales, and we
most recently received a CE mark for our LifeSpan ePTFE product in February 2021 from another one of our Notified Bodies,
SGS. For some products for which CE marks have not yet been reissued, we have continued selling product from our inventory
reserves already placed on the market in the EU prior to September 30, 2019. We previously believed those inventory reserves
would be adequate to meet demand, but in some cases they have not been sufficient due to the delay in the expected receipt of
our CE marks. We currently do not have valid CE marks for the following products:
Product
XenoSure
AlboGraft
AnastoClips
Flexcel & Pruitt carotid shunts
AlboSure
Status
Expired/Partially Derogated
Expired/Partially Derogated
Expired
Expired
Expired
Notified Body
TUV SUD
TUV SUD
SGS
SGS
SGS
We have been engaged in a process with TUV SUD to obtain CE marks for XenoSure and AlboGraft since February
2019. We have answered a substantial number of questions related to those products, and we believe their review with respect
to those products will conclude by May 2021. TUV SUD, in Q4 2020 as part of the XenoSure/AlboGraft CE marking process,
also audited our Burlington facility, and that audit remains open. Approximately two-thirds of the findings in that audit have
18
been accepted by TUV SUD, and the Company is currently engaged in a dialog with TUV SUD to try to resolve the
outstanding findings. Issuance of CE marks for XenoSure and AlboGraft depends on a successful audit closure as well as
product-specific approvals. Together, XenoSure and AlboGraft accounted for 27% of EMEA sales in 2020. Additionally,
retention of our other CE marks previously issued by TUV SUD could also depend on a successful audit closure, representing
37% of our 2020 EMEA sales. There can be no assurance that TUV SUD will issue CE marks for these products on a timely
basis or at all.
We expect that CE marks will be issued by SGS for the products ascribed to them in the chart above by May 2021,
except with respect to AlboSure, which may not achieve CE marking by this deadline. There can be no assurance that SGS will
issue CE marks for these products on a timely basis or at all.
As a result of the CE mark lapses, we have begun experiencing backorders related to some of these products and our
revenues are being impacted. The backorders for these products approximated $0.2 million as of December 31, 2020. To
mitigate, in part, the impact of these backorders, we have sought temporary exemptions, or derogations, in certain European
countries from the requirement to apply CE marks to XenoSure and AlboGraft while we continue to seek reissuance of CE
marks. We have received temporary authorization to sell XenoSure without a CE mark in 13 countries in Europe, and
AlboGraft in 14 countries, in each case subject to certain conditions and for limited periods expiring as soon as April 22, 2021.
Where customers are not satisfied with this authorization status, they have in some cases decided to stop using our product
and/or use a competing product and may continue to do so in the future, which could further impact our revenues. If we are
unsuccessful in obtaining extensions of these derogations, or the reissuance of our CE marks for any of these products is
materially delayed or withheld, our revenues could be further impacted and our business could be harmed.
Additionally, the CE mark for our Omniflow II graft is currently being transferred to our Burlington headquarters due to
our discontinuation of operations in North Melbourne, Australia in June 2020. If the transfer is not successful, the Omniflow II
will be subject to an MDR application process (see below). While the MDD CE mark would still remain valid for Australian-
built product, Burlington-produced units would not be allowed onto the European market until issuance of the MDR CE mark.
We expect that the inventory of the majority of such products held by our European subsidiary will only be sufficient to supply
customers until Q2 2022, based on historical sales, and as a result, we may go into backorder for Omniflow II until the MDR
CE mark is issued. If the CE mark certification for Omniflow II is materially delayed or withheld, our European revenues
could be impacted and our business could be harmed.
In April 2017, the EU adopted new regulations for medical devices (MDR), which replace the MDD and will apply
beginning May 26, 2021. Our products will be subject to the MDR, which requires all of our products, regardless of
classification, to obtain a new CE mark in accordance with the new, more stringent standards under the MDR. As a condition
to CE mark approval, clinical evidence will be required for Class III and implantable devices. As our Notified Bodies start to
transition from MDD to MDR, they have begun to impose more rigorous requirements on us in order to obtain approval to
renew the CE marks on certain of our products. For example, we have been informed by BSI, our Notified Body for the
product lines manufactured in our Saint-Etienne, France facility, that three of the four product lines require more clinical data
for the continuance of current CE mark certifications as well as the upcoming MDR certifications. If we fail to obtain sufficient
clinical data for these products, our current CE marks may be suspended or not issued in a timely manner or at all.
Additionally, if CE marks are not issued for any or all of our products with lapsed marks before May 26, 2021, then we will
need to reinitiate the application process in its entirety under the MDR for any such lapsed product, a process that could take up
to two years for each product. Our preparation of filings under the MDR has been delayed due to our work on the other CE
mark matters described above. If we fail to obtain new CE marks on these products or our other products under the MDR in a
timely manner, or at all, future sales of our products in the EU could be adversely impacted.
There can be no assurance that we will be able to obtain or maintain CE marks for our existing products, especially those
for which TUV SUD functions as our Notified Body, and obtaining CE marks 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. If we fail to obtain new CE marks on our products in a timely manner, or
at all, future sales of our products could be adversely impacted.
Failure to receive or maintain approval would prohibit us from selling these products in the EU or the U.K., and would
require significant delays in obtaining individual country approvals. If we do not receive or maintain these approvals, our
business could be harmed. 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. As highlighted above, there can be no assurance that we will be successful in
obtaining, retaining or maintaining the CE mark for any of our current products. In particular, adverse event reporting
19
requirements in the EU and the U.K. 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.
Our facilities are subject to periodic inspection by numerous regulatory authorities, including governmental agencies and
Notified Bodies, and we must demonstrate compliance with the applicable medical devices regulations. Our most recent
inspections were as follows:
Facility
Fox River Grove
Fox River Grove
Burlington
North Melbourne
Shanghai
Burlington
Agency
AATB
U.S. FDA
Notified Body (LRQA)
Notified Body (TUV Rheinland)
China FDA (NMPA)
Notified Body (LRQA)
Burlington
North Melbourne
North Melbourne Therapeutic Goods Administration (TGA)
Notified Body (LRQA)
Notified Body (TUV Rheinland)
Burlington
Burlington
Saint-Etienne
Tokyo
Burlington
Saint-Etienne
Burlington
North Melbourne
Saint-Etienne
Saint-Etienne
Burlington
Burlington
Saint-Etienne
Burlington
Fox River Grove
Burlington
Notified Body (LRQA)
Korean FDA
Notified Body (BSI)
Notified Body (JET)
Therapeutic Goods Administration (TGA)
Notified Body (BSI)
Notified Body (LRQA)
Notified Body (TUV Rheinland)
Notified Body (BSI)
Notified Body (BSI)
US FDA
Notified Body (BSI)
Notified Body (BSI)
Notified Body (SGS)
AATB
Notified Body (TUV SUD)
Jurisdiction
Worldwide
United States
Europe
Europe
China
Medical Device Single
Audit Program (MDSAP)
Europe
Europe
Australia
Europe
Korea
Europe
Japan
Australia
Europe
MDSAP
Europe
Europe
Europe
United States
Europe
Europe
Europe
Worldwide
MDSAP
Burlington
Notified Body (TUV SUD)
Burlington
Burlington
Notified Body (BSI)
Notified Body (SGS)
Europe
Europe
MDSAP
*Certificate issuance pending
Date
January 2018
January 2018
January 2018
January 2018
August 2018
October 2018
Result
Passed
Passed
Passed
Passed
Passed
Passed
November 2018
November 2018
December 2018
December 2018
January 2019
January 2019
February 2019
March 2019
March 2019
March 2019
June 2019
October 2019
January 2020
August 2020
October 2020
October 2020
October 2020
October 2020
October/November
2020
October/November
2020
January 2021
February 2021
Passed
Passed
Passed
Passed
Passed
Passed
Passed
Passed
Passed
Passed
Passed
Passed
Passed
Passed
Passed
Passed
Passed
Passed
Refused to
Certify
Open
Passed
Passed*
As noted above, TUV SUD audited the Company as part of the Medical Device Single Audit Program (MDSAP) in
November 2020. In January, TUV SUD determined not to issue an MDSAP certificate. LeMaitre promptly engaged SGS to
undertake a new MDSAP audit. The in-person part of the new audit ended on February 25, 2021, with a recommendation for
approval, and we expect successful issuance of an MDSAP certificate in March 2021. If we fail to receive the certificate in a
timely manner, or at all, Health Canada may act to suspend or cancel our device licenses until issuance of the
certificate. Additionally, the other jurisdictions participating in the MDSAP may determine to independently audit us
(regardless of receipt of a new certificate). The Company currently does not expect any sales impact in any geography from its
MDSAP inactive status.
Any failure by us to comply with regulatory requirements 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.
20
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 (NMPA) significantly increased the application fees for product registrations
and imposed additional requirements for obtaining product approval, which includes requirements for conducting clinical trials
to support the registration application process on newly introduced products in China. As a result, we may not seek registration
for certain products where the cost is not justified. Any delay in product registrations could have a negative impact on our
results of operations.
The COVID-19 global pandemic outbreak has caused disruptions in our business that are expected to continue for an
indefinite period of time.
Like many companies, we have experienced negative effects on our revenues and operations as a result of the COVID-19
global pandemic. The wide geographic spread of the pandemic has adversely affected the global economy and has resulted in
fluctuating and unpredictable demand for our products, many of which are used in elective surgical procedures. We began to
experience the negative impacts of the pandemic in March 2020. The negative impact to sales continued in the quarter ended
June 30, 2020, with sales decreasing by approximately 16% as compared to the quarter ended June 30, 2019. During the
quarters ended September 30, 2020 and December 31, 2020 our revenues increased as compared to the prior year quarters;
however, this was primarily due to our recently acquired Artegraft product line and foreign currency exchange rates.
We currently expect COVID-19’s impact on our revenues to continue into 2021, but it is difficult to estimate by how
much due to the uncertainty of the duration and severity of the pandemic. In addition, a recession resulting from the spread
of COVID-19 could materially affect our revenues, our business and the value of our common stock.
In addition to impacts to our sales, we have experienced other adverse impacts on our business from COVID-19,
including, but not limited to, restrictions on employee travel and limitations on our sales representatives’ access to customers.
While we expect the impacts of COVID-19 to have an adverse effect on our business, financial condition and results of
operations, we are unable to predict the extent or nature of these impacts at this time.
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;
the acceleration or deceleration of growth rates of our products, particularly in the case of biologic vascular
patches whose growth rate has declined over recent periods;
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 or products or divestitures or discontinuations of
products;
effects of domestic and foreign economic and political conditions and exchange rates on our industry and/or
customers;
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;
changes to the regulatory status of our products, including the lapse, suspension or cancellation of licenses or CE
marking;
the payment or cessation of quarterly cash dividends, and/or the amount and frequency at which to increase
them;
costs incurred by us to terminate contractual and other relationships, including those of distributors/agents;
our ability to collect outstanding accounts receivable in selected countries outside of the United States;
changes in laws in the jurisdictions in which we do business;
the expiration, elimination 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.
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These factors, some of which are not within our control, may cause the price of our common stock to fluctuate. 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 the sole indicator of our future performance.
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.
Treatment of peripheral vascular and cardiovascular disease includes both open vascular surgery and minimally invasive
endovascular procedures, and most of our products are used primarily or exclusively in open surgery procedures. We market
and sell our products primarily to vascular surgeons. We estimate that in 2020 over 90% of our sales were from devices used in
open surgery.
We may not be able to compete effectively 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.
We may not maintain our recent levels of profitability.
There can be no assurance we will continue to achieve net sales growth and/or profit growth in the future. In 2020 we
undertook substantial cost reductions in response to the COIVD-19 pandemic, and we have reversed many of those reductions.
If, for example, we are unable to effectively manage our operating expenses due to, for example, additional CE mark expenses,
or increased headcount, we may need to implement cost-cutting again in order to maintain or improve our 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 expenses;
our ability to restrain or reduce operating expenses through cost-cutting measures;
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 reimbursement rates for the medical procedures in which our products are used;
the cost of litigation, if any; and
changes in tax laws.
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We may experience difficulties in integrating acquired businesses and products into our business, or we may not realize the
anticipated benefits of these acquisitions.
In order to expand our product offerings, we have completed 24 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;
degradation in our corporate gross margin due to lower margins associated with our acquired devices;
the sudden reduction in volume or loss of orders from a key customer, particularly where the acquired company
had concentrated sales;
diversion of management’s time and attention from other business concerns;
higher costs of integration than 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;
challenges in maintaining or obtaining regulatory approvals for acquired products;
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 2018 in Saint-Etienne, France;
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 financing to fund acquisitions, which we incurred to acquire Artegraft and is senior to our
common stock, requires interest payments to our lenders, and could restrict our ability to pay dividends to our
shareholders.
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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 future acquisitions, and could harm
our financial condition and results of operations.
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 call point focus on the vascular surgeon with a product portfolio largely used in open vascular 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. For example, some vascular surgeons have begun using transcarotid arterial revascularization, a new
minimally invasive procedure, to treat carotid artery disease in lieu of a procedure in which our carotid shunts and vascular
patches are used. 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 estimate that in 2020, over
90% of our net sales were from devices used in open vascular procedures.
Demographic trends and other factors, such as reimbursement rates, are driving vascular surgeons to increasingly
specialize in certain kinds of procedures, such as the creation and maintenance of dialysis access sites and endovascular
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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 of open vascular
skills. 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.
CardioCel is sold to a different call point from that of most of our product lines, and we may not be successful in selling to
that call point.
Historically, the majority of sales of CardioCel have been to pediatric cardiac surgeons, a call point that is different from
our main call point focus. 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. As a result, our sales representatives call predominantly on
vascular surgeons and to a lesser extent, cardiac and neuro surgeons. Our success in selling CardioCel will depend, in part, on
our sales representatives devoting a portion of their time to making sales calls to, and establishing relationships with, pediatric
cardiac surgeons. If they do not undertake these activities or are unsuccessful in doing so, then this could lead to the loss of
CardioCel sales and customers, and our financial condition or results of operations could be harmed. Most of our product lines
are used in vascular procedures and as a result, our sales representatives are able to cross-sell most of our product portfolio to
vascular surgeons. Cross-selling opportunities to pediatric cardiac surgeons are limited. Additionally, if our sales
representatives spend less time focused on vascular surgeons, the sales of our vascular products could decrease, and our
financial condition or results of operations could 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.
Our ability to successfully provide RestoreFlow allograft processing, preservation and distribution 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 before our 2016 acquisition of the RestoreFlow operations, 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, particularly as we may compete for these tissues with organizations who may have
greater resources than us and as procurement of cadavers has been challenging during the COVID-19 pandemic;
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 own 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 business and 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 components and certain products. For example,
components of our EndoRE product line are manufactured for us by third-party suppliers. Also, we rely on a sole-source
supplier for ovine material used in our Omniflow II graft.
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 multiple 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 allograft service
revenues could be adversely affected.
When we acquire a product line, we often enter into an agreement with the seller of the product line for a period of one
to three years for the supply of the acquired product until we can transition manufacturing to our facilities. Those arrangements
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are always sole source supply arrangements with a supplier that has determined to divest the product it is manufacturing. As a
result, the supplier may not allocate sufficient resources to the manufacture of our product in favor of dedicating resources to
its remaining business. Additionally, there is significant risk if the supplier does not have the financial means to continue to
supply product. For example, in the case of our 2019 acquisition of the CardioCel and VascuCel biologic patches, Anteris
Technologies Ltd (formerly known as Admedus Ltd) and its affiliates have agreed to continue to supply those products to us
for up to three years. For the year ended December 31, 2020, Anteris reported revenue from continuing operations of A$7.1
million and a loss before income tax from continuing operations of A$15.3 million. If Anteris fails to meet its obligations
under the supply agreement on a timely basis, or at all, then we may experience interruptions in our supply of the acquired
products or we may not receive a future supply of the acquired products until we establish our own manufacturing. If we do not
have sufficient supply of an acquired product, this could lead to loss of sales, customer dissatisfaction and damage to our
reputation, and our financial condition or results of operations could be harmed.
There are relatively few, or in some cases no, alternative, validated sources of supply for these materials and
products. We do not always have supply agreements in place with 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 materials or products on
acceptable terms or otherwise. We do not ordinarily carry a significant inventory of these materials 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 loss of sales and customers, and our financial condition or results of
operations could be harmed.
Any disruption in our manufacturing facilities could harm our results of operations.
Our principal worldwide executive, distribution, and manufacturing operations are located in five leased facilities in
Burlington, Massachusetts. We also have manufacturing sites in North Brunswick, New Jersey and Saint-Etienne, France as
well as a tissue processing preservation and distribution facility in Fox River Grove, Illinois. These facilities and the equipment
we use to manufacture 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.
We depend on our senior management team and other key sales and technical personnel, and if we are unable to retain
them or recruit additional qualified personnel we may not be able to manage our operations and meet our strategic
objectives.
We depend on the continued services of our senior management team and other key sales and technical personnel, as
well as our ability to continue to attract and retain additional highly qualified personnel. Each of our key employees may
terminate his or her employment with us at any time, and the loss of any of our senior management team or key employees
could harm our business. Because we compete for such personnel with other companies, academic institutions, government
entities, and other organizations, we may not be able to meet our future hiring needs or retain existing personnel on acceptable
terms. Any loss or interruption of the services of our key personnel could also significantly reduce our ability to effectively
manage our operations and meet our commercial or strategic objectives, because we cannot be sure that we would be able to
find an appropriate replacement on a timely basis.
Certain of our products contain materials derived from animal sources and may become subject to additional regulation.
Our AlboGraft vascular graft, AlboSure vascular patch, Artegraft biologic patch, Dialine II vascular graft, Wovex
vascular graft, XenoSure biologic patch, ProCol vascular graft and CardioCel and VascuCel patch products contain bovine
tissue or material derived from bovine sources, our Omniflow II Biosynthetic Vascular Graft contains ovine tissue, and our
surgical glue contains porcine gelatin. Products that contain materials derived from animal sources 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
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BSE in cattle discovered in Canada and the U.S. have also 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.
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.
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 competitors are able to
manufacture at lower costs and may offer comparable products at lower prices. Certain competitors may also have greater
experience in developing and improving products, obtaining regulatory approvals, and manufacturing and marketing products.
Certain 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. 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 different kinds of medical devices than we
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, 2020, 2019 and 2018, 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
valvulotome sales. In the past, we have been able to rely upon our well-known brands and our established reputation to
implement price increases.
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 U.S., in response to government-enacted healthcare reform,
general economic conditions, or the influence of accountable care organizations;
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.
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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 making our products 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.
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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 outside of the U.S. For the year ended December 31, 2020, 42% of
our net sales were derived from outside of the U.S.. 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;
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 or party with whom we do business that
would restrict or prohibit continued business with the sanctioned country or party;
a shortage of high-quality sales personnel and distributors;
loss of any key personnel who are 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 on us;
pricing pressure that we may experience internationally;
laws and business practices favoring local companies;
longer payment cycles;
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 are defectively designed, manufactured, processed or labeled, contain defective
components, or are misused, or if our products or the tissues we process 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
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litigation, could entail significant cost for us, divert management’s time and attention and harm our business. Additionally, we
could experience adverse effects of litigation even before finally adjudicated if a counterparty is granted intermediate relief
such as an injunction. Even claims without merit could subject us to adverse publicity and require us to incur significant legal
fees. 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 direct-to-hospital through our own direct sales representatives. In the future, we may elect to
convert select additional countries and products from distributor sales to direct-to-hospital 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 because distributors, unlike direct sales representatives, pay us for inventory which they store 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 bill and collect from the single distributor.
Our distribution agreements are exclusive, where permissible, 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-to-hospital 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-to-
hospital model. The transition to a direct sales model may require us to meet regulatory requirements that were previously the
responsibility of the distributor, which may subject us to additional costs. It also may take us longer than expected to find
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 may be time-consuming to manage remotely, as is the case with our
sales office in China, which consumes a disproportionate amount of resources in view of its sales levels. 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
significant portion of our revenue and costs is denominated in other currencies, such as the Euro, the British pound, the
Japanese yen, the Canadian dollar, the Chinese yuan and the Australian dollar. For the year ended December 31, 2020, 42% of
our net sales were to customers outside the U.S., largely in currencies other than the U.S. dollar. 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. Conversely, our local currency-
based net assets, revenue, operating expenses, and net income will decrease if the U.S. dollar strengthens against the local
currency. Additionally, receivable and payable balances denominated in currencies other than the functional currency may
result in gains and losses upon settlement 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,
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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 that 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 U.S. 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 tissue, 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.
Each medical device that we wish to market in the U.S. 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 three to twelve months from the date the FDA receives the
application, but may take longer. Although 510(k) clearances have been obtained for nearly all of our current products that
require such 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 existing 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 longer. Achieving premarket approval typically requires extensive clinical trials and may require the filing of numerous
amendments with the FDA over time. The FDA may also require post-approval studies to continue demonstrating the safe and
effective performance of these devices. We do not have significant experience in obtaining PMA approval or conducting these
studies for our products.
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.
Additionally, in April 2018, the FDA announced the Medical Device Safety Action Plan: Protecting Patients, Promoting Public
Health in which the FDA has proposed limiting the age of predicate devices used in 510(k) applications, thus narrowing the
field of available predicates for comparison in the 510(k) process. The FDA may also require the more extensive PMA process
29
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 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 U.S. 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 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 EU, 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 March 2020 we conducted
a worldwide recall of a substantial number of our TufTex over-the-wire embolectomy catheters due to a risk of the balloon
catheter failing to deflate during use. We experienced backorders for these products while we addressed this issue. Recalls,
30
whether voluntary or required, 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.
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 U.S. 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 U.S. 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 U.S. and abroad, or adverse decisions
relating to our products by administrators of these systems in coverage or reimbursement, could 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.
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 intellectual property rights, 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.
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, any pending patent applications may not
31
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 U.S.. 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 or other intellectual property rights 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.
It is also possible that a third party could claim that our manufacturing process violates an existing patent or other
intellectual property rights. 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 or other intellectual property rights of 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
32
agreement, 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 and Outstanding Debt
Our stock price may be volatile, and an 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. Shareholders may not be able to resell their shares at or above the price at which they
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 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;
new laws or regulations or new interpretations of existing laws or regulations applicable to our business;
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;
reduced or lower volume of trading in our common stock; and
our inclusion in or removal from stock market indices, such as the S&P 600 or Russell 2000.
In the past, following periods of volatility in the market price of a company’s securities, securities class action litigation
has often been brought. This litigation, if brought 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 the LeMaitre Family LLC collectively control approximately 14% of our outstanding
common stock as of December 31, 2020. As a result, these stockholders, if they were to act together, could 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 other
stockholders.
33
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 our credit facility
may restrict our ability to pay future quarterly dividends. We can provide no assurance of our ability to pay dividends in the
future.
Our level of indebtedness could adversely affect our financial condition and make it more difficult for us to fund our
operations.
As of December 31, 2020, we had $39.0 million of indebtedness outstanding under our credit facility. Our level of
indebtedness could have important negative consequences to you and us, including:
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we may have difficulty satisfying our obligations under the credit facility;
we may have difficulty obtaining financing in the future for working capital, capital expenditures, acquisitions or
other purposes;
we will need to use a portion of our available cash flow to pay interest and principal on our debt, which will
reduce the amount of money available to finance our operations, dividends and other business activities;
our debt level increases our vulnerability to general economic downturns and adverse industry conditions;
our debt level could limit our flexibility in planning for, or reacting to, changes in our business and in our
industry in general;
our leverage could place us at a competitive disadvantage compared to our competitors that have less debt;
our failure to comply with the financial and other restrictive covenants in our credit agreement, which, among
other things, may require us to maintain specified financial ratios and may limit our ability to incur additional
debt and sell assets, could result in an event of default that, if not cured or waived, could have a material adverse
effect on our business.
Item 1B. Unresolved Staff Comments
None.
Item 2. Properties
Our principal worldwide executive, distribution, and manufacturing operations are located at five leased facilities with
square footage totaling 109,354 in Burlington, Massachusetts. All five Burlington leases expire in December 2030. In
connection with our acquisition of the Artegraft biologic graft business, we assumed a 16,732 square foot lease in North
Brunswick, New Jersey, which expires in October 2029. In addition, our European operations are headquartered at a 16,470
square foot leased facility located in Sulzbach, Germany, with a lease expiring in August 2023. We also lease additional
manufacturing, processing, distribution and sales offices in other U.S., Europe, U.K. and Asia/Pacific Rim locations. Based on
our current operating plans, we believe our current facilities are adequate for our needs.
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, contractual, 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, 2020,
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 Equity
PART II
Securities
Market Information
Our common stock is publicly traded on The Nasdaq Global Market under the symbol “LMAT”. Prior to our initial
public offering on October 19, 2006, there was no public trading market for our common stock.
Holders of Record
On March 2, 2021, the closing price per share of our common stock was $51.38 as reported on The Nasdaq Global
Market, and we had approximately 162 stockholders of record. In addition, we believe that a significant number of beneficial
owners of our common stock hold their shares in street name.
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, 2015, through the end of LeMaitre’s fiscal year ended December 31, 2020. The graph assumes an investment of
$100.00 made on December 31, 2015, 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. The
following shall not be deemed incorporated by reference into any of our other filings under the Securities Exchange Act of
1934, as amended, or the Securities Act of 1933, as amended, except to the extent we specifically incorporate it by reference
into such filings.
35
The comparisons in the graph below are based upon historical data and are not indicative of, nor intended to forecast, future
performance of our common stock.
12/15
12/16
12/17
12/18
12/19
12/20
LeMaitre Vascular, Inc ...................................... 100.00
NASDAQ Composite ........................................ 100.00
NASDAQ Medical Equipment .......................... 100.00
Peer Group ........................................................ 100.00
148.49
108.87
106.07
137.80
187.96
141.13
153.41
181.17
140.73
137.12
171.99
227.29
216.40 246.88
187.44 271.64
209.03 300.10
245.62 316.05
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 the year presented. The 2020 peer
group includes the following companies: AngioDynamics, Inc., Cardiovascular Systems Inc., Cryolife Inc., Merit Medical
Systems, Inc., Penumbra, Inc, Silk Road Medical, Inc, and Shockwave Medical, Inc.
36
Recent Sales of Unregistered Securities
Not Applicable.
Issuer Purchases of Equity Securities
Period
Issuer Purchases of Equity Securities
Average
Price
Total
Number of
Paid Per
Shares (or Units) Share (or
Purchased (1)
Unit)
Maximum Number
(or Approximate
Total Number of Dollar Value) of
Shares (or Units) Shares (or Units)
Purchased as
that may yet be
Part of Publicly Purchased under
Announced Plans
or Program
the Plans or
Program
October 1, 2020 through October 31, 2020 ..............
November 1, 2020 through November 30, 2020 ......
December 1, 2020 through December 31, 2020 .......
105 $
- $
7,301 $
33.21
-
37.75
Total .........................................................................
7,406 $
37.69
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
(1) For the three months ended December 31, 2020, we repurchased 7,406 shares of our common stock to satisfy
employees’ obligations with respect to minimum statutory withholding taxes in connection with the vesting of restricted
stock units.
Item 6. Selected Financial Data
Omitted.
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.
The principal objectives of this Management’s Discussion and Analysis of Financial Condition and Results of Operations are
to enhance our overall financial disclosures by providing explanation and analysis of the Company’s financial results and
condition, as viewed by our management.
Overview
We are a medical device company that develops, manufactures, and markets medical devices and implants largely used
in the treatment of peripheral vascular disease. To a lesser extent, our devices are also used to treat diabetes and cardiovascular
disease, and are used in neurosurgery applications. We also provide processing and cryopreservation services of peripheral
vascular human tissue for implantation into patients. Our principal product offerings are sold throughout the world, primarily in
the United States, Europe, the U.K., Canada and Asia/Pacific Rim. We estimate that the annual worldwide market for all of our
devices exceeds $5 billion, within which our core product lines address roughly $750 million. We have grown our business
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 devices. We have used acquisitions
as a primary means of further penetrating the peripheral vascular device market, and we expect to continue to pursue this
strategy in the future. We currently manufacture most of our products in our Burlington, Massachusetts headquarters.
Our products are used primarily by vascular surgeons who treat peripheral vascular disease through both open surgery
and endovascular techniques. In contrast to interventional cardiologists and interventional radiologists, vascular surgeons can
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perform both open surgery and minimally invasive endovascular procedures, and are therefore uniquely positioned to provide a
wide range of treatment options to patients.
Our principal product lines include the following: valvulotomes, biologic vascular patches, biologic vascular grafts,
carotid shunts, embolectomy catheters, anastomotic clips, radiopaque marking tape, powered phlebectomy devices, synthetic
vascular grafts and surgical glue. Through our RestoreFlow allografts business we also provide services related to the
processing and cryopreservation of human vascular and cardiac tissue.
To assist us in evaluating our business strategies, we monitor long-term technology trends in peripheral vascular and
other device markets. 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.
Historically we have experienced success in lower-rivalry niche segments, for example the markets for valvulotomes and
carotid shunts. In the valvulotome market, our highly differentiated devices have historically allowed us to increase our selling
prices while maintaining our unit share. In contrast, we have experienced less success in highly competitive markets such as
our AlboGraft vascular graft product line, where we face strong competition from larger companies with greater resources.
While we believe that these challenging market dynamics can be mitigated by our relationships with vascular surgeons, there
can be no assurance that we will be successful in these highly competitive markets.
In recent years we have also experienced success in international markets, such as Europe, where we sometimes offer
comparatively lower average selling prices. If we continue to seek growth opportunities outside of North America, we may
experience downward pressure on our gross margin.
Our business opportunities include the following:
• the long-term growth of our direct sales force in North America, Europe and Asia/Pacific Rim;
• the addition of complementary products through acquisitions;
• the introduction of our products in new territories upon receipt of regulatory approvals or registrations in these
territories;
• the updating of existing products and introduction of new products through research and development; and
• the consolidation of manufacturing into our Burlington, Massachusetts corporate headquarters.
We sell our products and services primarily through a direct sales force. As of December 31, 2020 our sales force was
comprised of 80 sales representatives in North America, Europe and Asia/Pacific Rim, including two export managers. Our
worldwide headquarters is located in Burlington, Massachusetts, and we also have North American sales offices in Chandler,
Arizona and Vaughan, Canada. Our European headquarters is located in Sulzbach, Germany, and we also have sales offices in
Milan, Italy; Madrid, Spain; and Hereford, England. Our Asia/Pacific Rim headquarters is located in Singapore, and we have
sales offices in Tokyo, Japan; Shanghai, China; and Kensington, Australia. During the years ended December 31, 2020 and
2019, approximately 95% and 94%, respectively, of our net sales were generated in territories in which we employ direct sales
representatives. We also sell our products in other countries, including South Korea, Russia and Brazil, through distributors.
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 into our direct sales organization:
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In March 2018, we terminated our master distribution agreement with Sinopharm United Medical Device Co., Ltd.
(Sinopharm), under which we sold our TRIVEX devices for distribution in China. In April 2018, we began selling
these products to sub-distributors in China. In June 2019, we agreed to purchase at a discount all of Sinopharm’s
remaining inventory of our powered phlebectomy devices in settlement of a lawsuit they filed against us in China.
• During 2018, we entered into definitive agreements with several former Applied Medical and Cardial distributors
in Europe and Asia in order to terminate their distribution of our recently-acquired embolectomy catheter, polyester
graft and valve cutter products, and we began selling direct-to-hospitals in those geographies. The termination fees
totaled approximately $0.1 million.
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• During 2020, we entered into definitive agreements with, or participated with Anteris in concluding agreements
with, several former Anteris distributors in Europe and Canada, in order to terminate their distribution of our
recently-acquired bovine cardiac and vascular patch products, and we began selling direct-to-hospitals in those
geographies. The termination fees totaled approximately $0.1 million.
• During 2020, we participated with Artegraft in concluding agreements with several of their former U.S. distributors
in order to terminate their distribution of our bovine graft products. We now sell Artegraft products direct-to-
hospitals throughout the U.S.
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:
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•
•
•
•
In April 2018, we divested our Reddick cholangiogram catheter and Reddick-Saye screw product lines to Specialty
Surgical Instrumentation for $7.4 million.
In September 2018, we acquired the assets of the Syntel embolectomy catheter business from Applied Medical for
$14.2 million.
In October 2018, we acquired the assets of Cardial, a subsidiary of Becton, Dickinson, located in Saint-Etienne,
France, for €2.0 million. Cardial’s product lines include polyester vascular grafts, valve cutters and surgical glue.
In July 2019, we entered into an agreement with UreSil, LLC to purchase the remaining assets of their Eze-Sit
valve cutter business, including U.S. distribution rights, for $8.0 million.
In October 2019, we entered into an agreement with Anteris to purchase the assets of their CardioCel biologic
patch business for $15.5 million plus additional payments of up to $7.8 million, depending upon the satisfaction of
certain contingencies.
In June 2020, we entered into an agreement with Artegraft to purchase the assets of their bovine graft business for
$72.5 million plus additional payments of up to $17.5 million, depending upon 2021 – 2023 unit sales.
In addition to relying upon acquisitions for growth, we also rely on internal product development efforts to bring
differentiated technology and next-generation products to market:
•
•
•
In 2018, we expanded the U.S. indications for our Anastoclip GC to include dura tissue repair.
In 2019, we launched XenoSure Plus aimed at a segment of the market that prefers a thicker biologic patch
In 2019, we also launched DuraSure, a biologic patch indicated for closing or repairing dural defects during open
neurosurgical procedures.
•
In 2020, we launched RestoreFlow cardiac allografts for use in cardiac repair and restoration.
In addition to our sales growth strategies, we have also executed several operational initiatives designed to consolidate
manufacturing into our Burlington facilities. We expect these plant consolidations will result in improved control over
production quality as well as reduced costs. Our most recent manufacturing transfers included:
•
•
•
In September 2018, we acquired the embolectomy catheter business from Applied Medical. We initiated a project
to transfer production to our Burlington facilities. This transfer is now complete.
In late 2018 and into 2019, we expanded our Burlington biologic clean room in order to transfer the production of
our Omniflow II vascular graft from our North Melbourne, Australia facility to Burlington. This transfer is now
complete.
In October 2019, we acquired the biologic patch business assets from Anteris. In July 2020, we initiated a project
to transfer production to our Burlington facilities. We expect this transfer to be complete in 2022 or 2023
Our execution of these transfers may affect the comparability of our financial results from period to period and may
cause fluctuations as we incur process engineering and other charges.
39
Fluctuations in the exchange rates between the U.S. dollar and foreign currencies, primarily the Euro, affect our financial
results. For the year ended December 31, 2020, approximately 42% of our sales took place outside the U.S., largely in
currencies other than the U.S. dollar. We expect foreign currencies will represent a significant percentage of future sales.
Selling, marketing, and administrative costs related to these sales are also denominated in foreign currencies, thereby partially
mitigating our bottom-line exposure to exchange rate fluctuations. However, 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 record less revenue in U.S. dollars than we did before the exchange
rate changed. For 2020, we estimate that the effects of changes in foreign exchange rates increased our reported sales by
approximately $0.8 million, as compared to rates in effect for 2019.
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 to distributors, who sell on to hospitals and clinics. In certain cases our products are consigned to 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 the majority 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 vascular congresses, training programs, advertising and product
promotions, direct mail and other marketing costs.
General and administrative. General and administrative expense consists primarily of executive, finance and human
resource salaries, 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 U.S., which include
operating losses or profits 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 U.S. and foreign subsidiaries, permanent items, discrete items, unrecognized tax benefits, and amortization
of goodwill for U.S. tax reporting purposes.
Results of Operations
In March 2020, we began to experience negative effects on our revenues and operations as a result of the COVID-19
global pandemic. Our revenues increased 7% during the quarter ended March 31, 2020 as compared to the prior year quarter,
but for the quarter ended June 30, 2020, sales decreased 16% versus the prior year quarter, with the largest sales impacts in the
U.S., Germany, Italy and France. Some of our sales offices were closed during the second quarter of 2020, and in many cases
our employees are still working remotely.
During the quarter ended September 30, 2020 revenues increased by $7.3 million, or 25%, compared to the quarter ended
September 30, 2019; however, of that increase, $5.4 million was from our recently acquired Artegraft product line, and we
estimate that approximately $0.5 million was from changes in foreign currency exchange rates. For the full year 2020 our sales
40
were higher by 10%, or $12.1 million, as compared to 2019, with a substantial portion ($11.1 million) attributable to the
Artegraft acquisition. We currently expect to see a continued negative impact from COVID-19 on our revenues, gross profit
and gross margin in 2021, but it is difficult to estimate by how much, due to the uncertain duration and severity of the
pandemic.
In April 2020, we initiated a plan to reduce our global workforce by approximately 13%, and to temporarily reduce base
salaries for certain employees. The salary reduction program applied to all employees earning more than $40,000 per year and
was applied outside of the U.S. to the extent permissible under applicable local laws and regulations. These salary reductions
remained in place until August 31, 2020, at which point full base salaries were restored. In addition, we have subsequently
begun to hire employees into many of the areas previously reduced, and we expect to add personnel in 2021. Annual salary and
bonus increases for 2021, which normally occur in January of each year, were brought forward to November 2020.
For reasons described above, we expect that results will continue to be impacted in the near term. These financial
statements and management’s discussion and analysis of financial condition and results of operations should be read in that
context.
Comparison of the year ended December 31, 2020 to the year ended December 31, 2019
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 .......................................................... $
129,366 $
($ in thousands)
117,232 $
12,134
10 %
2020
2019
$ Change
Percent
change
Net sales by geography:
Americas ...................................................... $
Europe, Middle East and Africa ..................
Asai/Pacific Rim ..........................................
Total ............................................................. $
81,470 $
39,193
8,703
129,366 $
69,359 $
39,480
8,393
117,232 $
12,111
(287)
310
12,134
17 %
(1 %)
4 %
10 %
Net sales. Net sales increased 10% or $12.1 million to $129.4 million for the year ended December 31, 2020, compared
to $117.2 million for the year ended December 31, 2019. The increase was largely from recently acquired products including
Artegraft bovine grafts of $10.8 million and CardioCel bovine cardiac patches of $5.3 million. We also had higher valvulotome
sales of $3.9 million, including sales of Eze-Sit in the U.S., which we acquired in July 2019. These sales increases were partly
offset by lower OEM sales of $2.2 million, lower sales of carotid shunts of $1.8 million, lower XenoSure bovine carotid patch
sales of $1.1 million, lower TRIVEX sales of $1.0 million and lower AnastoClip sales of $0.8 million. All other products
decreased on a net basis by $2.0 million. We estimate that changes in foreign exchange rates during the year ended December
31, 2020 increased net sales by $0.8 million.
Direct-to-hospital net sales were 95% of total sales for the year ended December 31, 2020 and 94% for the year ended
December 31, 2019.
Net sales by geography. Net sales in the Americas increased $12.1 million or 17% for the year ended December 31,
2020. The increase was driven mainly by recently acquired products including Artegraft of $10.8 million and CardioCel of
$3.5 million. We also had higher valvulotome sales of $2.8 million. These increases were partly offset by decreases across
most product lines which, with the exception of OEM sales, we believe were due primarily to the impact of the COVID-19
pandemic. Product lines with the largest decreases included carotid shunts and OEM sales, each decreasing by $1.5 million,
bovine carotid patches which decreased $0.7 million and vessel closure systems which decreased by $0.9 million. All other
products combined decreased by $0.4 million.
Europe, Middle East and Africa net sales were relatively unchanged year-over-year, at $39.2 million for the year ended
December 31, 2020 as compared to $39.5 million for the year ended December 31, 2019. Sales of CardioCel cardiac patches
increased by $1.4 million and valvulotomes increased by $1.0 million, offset by declines in most other product lines. Products
with larger decreases included Omniflow II grafts and OEM sales, which each decreased by $0.7 million, and bovine carotid
patches, which decreased by $0.6 million. As discussed under Item 1A. Risk Factors, we have experienced a lapse in CE mark
certifications for some products due to one of our Notified Bodies abandoning CE mark certifications services. This caused
41
certain of our products to go on backorder starting in the quarter ended June 30, 2020, including bovine carotid patches and
polyester grafts. We received temporary approvals in most European countries, which allowed us to resume sales of those
products for a limited time period, pending recertification.
Asia/Pacific Rim net sales increased $0.4 million or 4% for the year ended December 31, 2020. Increased sales of
CardioCel cardiac patches of $0.5 million, bovine carotid patches of $0.2 million and embolectomy catheters of $0.2 million
were offset in part by declines in sales of TRIVEX of $0.6 million.
Gross profit .................................................... $
84,618
$
($ in thousands)
79,853
$
4,765
2020
2019
Change
Gross margin ..................................................
65.4%
68.1%
(2.7%)
Percent
change
6%
*
* Not applicable
Gross Profit. Gross profit increased $4.8 million to $84.6 million for the year ended December 31, 2020, while gross
margin decreased by 270 basis points to 65.4% in the period. The decrease in the gross margin was driven primarily by the
impact of purchase accounting from the Artegraft acquisition and to a lesser extent by manufacturing inefficiencies, as well as
a slightly less favorable product mix, including higher sales of CardioCel cardiac patches and embolectomy catheters.
Operating Expenses.
2020
2019
Percent
$ change change
($ in thousands)
2020 as a
% of
Net Sales
2019 as a %
of Net Sales
Sales and marketing ................ $
General and administrative .....
Research and development .....
Gain on sale of building ..........
$
23,700 $
22,501
10,099
(470 )
55,830 $
30,339 $
19,055
9,276
-
58,670 $
(6,639 )
3,446
823
(470 )
(2,840 )
(22 %)
18 %
9 %
*
(5 %)
18 %
17 %
8 %
(0 %)
43 %
26 %
16 %
8 %
*
50 %
* Not a meaningful percentage.
Sales and marketing. For the year ended December 31, 2020, sales and marketing expense decreased $6.6 million, or
22%, to $23.7 million. The decrease was driven mainly by expense reduction programs implemented in response to the
COVID-19 global pandemic, including a reduction in force and temporary base salary cuts in place until August 31. The major
components of the sales and marketing expense reduction were salaries and related expenses of $2.3 million, travel and related
expenses of $1.9 million, and commission expense of $1.6 million. As a percentage of net sales, sales and marketing expense
decreased to 22% for the year ended December 31, 2020 from 26% in the prior period.
General and administrative. For the year ended December 31, 2020, general and administrative expense increased $3.5
million, or 18%, to $22.5 million. Higher acquisition-related costs including consulting and other transaction costs of
approximately $1.2 million and increased amortization expense of $2.6 million were partly offset by lower compensation-
related costs from our reduction in force and temporary wage cuts of $0.6 million. Other expense categories increased by an
additional $0.3 million on a net basis. As a percentage of net sales, general and administrative expense was 17% for 2020 and
16% for 2019.
Research and development. For the year ended December 31, 2020, research and development expense increased $0.8
million, or 9%, to $10.1 million. Product development and process engineering expenses decreased $1.2 million or 22% on a
combined basis, in large part due to completion of the manufacturing transfer of certain acquired products to our Burlington
facilities. Clinical and regulatory expenses increased $2.3 million or 67%, as a result of consulting and other costs incurred in
connection with reinstating or maintaining regulatory approvals, especially in Europe, as well as regulatory submissions for our
products in geographies such as China and Japan, and testing related to our biologic products. Royalty expense decreased $0.3
42
million due to the expiration of underlying royalty agreements. As a percentage of sales, research and development expense
were 8% for both 2020 and 2019.
Gain on sale of building. During the first quarter of 2020, in connection with our planned manufacturing transfer of
Omniflow II to Burlington, we executed an agreement to sell our land and building in North Melbourne, Australia for A$2.9
million ($2.0 million). The sale closed in September 2020. The building had a net book value of A$1.9 million ($1.4 million).
We recognized a $0.5 million gain on the sale, net of applicable sales taxes and administrative costs.
Other income (expense). Other income (expense) primarily includes interest income and expense, foreign currency gains
(losses), and other miscellaneous gains (losses). Interest income was $0.2 million and $0.7 million, respectively for 2020 and
2019. The decrease was due to the liquidation of most of our interest-bearing investments to acquire Artegraft. We also
incurred debt of $65.0 million in order to complete the acquisition, which generated $1.3 million of interest expense in 2020.
Foreign exchange losses on settlements or remeasurement of receivables and payables denominated in foreign currencies were
$0.3 million and $0.2 million in 2020 and 2019, respectively.
Income tax expense. We recorded a provision for taxes of $6.1 million on pre-tax income of $27.4 million in 2020 as
compared to $3.7 million on pre-tax income of $21.7 million in 2019. The 2020 provision was comprised of a U.S. federal tax
provision of $4.2 million, a state tax provision of $0.7 million, and a foreign tax provision of $1.2 million. The 2019 provision
was comprised of a U.S. federal tax provision of $2.0 million, a state tax provision of $0.4 million, and a foreign tax provision
of $1.3 million. Our effective tax rate differed from the U.S. statutory tax rate in 2020 principally because of stock option
exercises, taxes on foreign earnings, valuation allowances, and certain permanent differences. 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 assess the likelihood that our deferred tax assets will be realized through future taxable income and record a
valuation allowance to reduce gross deferred tax assets to an amount we believe is more likely than not to be realized. As of
December 31, 2020, we have provided a valuation allowance of $1.8 million for deferred tax assets primarily related to
Australian net operating loss and capital loss carry forwards and Massachusetts tax credit carry forwards that are not expected
to be realized.
Refer to Note 9 to our consolidated financial statements for additional information about income tax expense (benefit)
including information related to U.S. tax reform legislation.
Comparison of the year ended December 31, 2019 to the year ended December 31, 2018
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:
2019
2018
$ Change
Percent
change
Net sales .................................................... $
117,232 $
($ in thousands)
105,568 $
11,664
Net sales by geography:
Americas ................................................ $
Europe, Middle East and Africa ............
Asai/Pacific Rim ....................................
Total ....................................................... $
69,359 $
39,480
8,393
117,232 $
63,649 $
35,319
6,600
105,568 $
5,710
4,161
1,793
11,664
11 %
9 %
12 %
27 %
11 %
Net sales. Net sales increased 11% or $11.7 million to $117.2 million for the year ended December 31, 2019, compared
to $105.6 million for the year ended December 31, 2018. Sales increases were primarily driven by increased sales of our
embolectomy catheters of $4.3 million, of which $3.4 million was from our 2018 acquisition of Syntel embolectomy catheters;
valvulotomes of $1.6 million, of which $1.2 million was from our Eze-Sit and Chevalier acquisitions in 2019 and 2018,
respectively; and polyester grafts of $1.5 million, of which $0.4 million was from our Cardial acquisition. We also had an
increase in human tissue cryopreservation service revenues from our RestoreFlow allograft business of $1.4 million. Our
recently acquired CardioCel and VascuCel products contributed combined sales of $1.2 million in 2019. These and other
product line increases were partially offset by decreased sales of TRIVEX of $0.8 million.
43
Direct-to-hospital net sales were 94% for the year ended December 31, 2019 and 95% for the year ended December 31,
2018.
Net sales by geography. Net sales in the Americas increased $5.7 million or 9% for the year ended December 31, 2019.
The increase was primarily driven by increased sales of embolectomy catheters of $2.6 million, in part due to our acquisition of
the Syntel embolectomy catheters, and increased human tissue cryopreservation services of $1.4 million. We also increased
sales of valvulotomes by $1.1 million, and our recently acquired CardioCel and VascuCel products contributed sales of $0.9
million in the Americas in 2019. These increases were partially offset by decreased sales of TRIVEX of $0.8 million.
Europe, Middle East and Africa net sales increased $4.2 million or 12% for the year ended December 31, 2019. The
increase was primarily driven by increased sales of polyester grafts of $1.3 million, embolectomy catheters of $0.8 million,
OEM sales of $0.7 million, valvulotomes of $0.6 million and Omniflow II grafts of $0.4 million.
Asia/Pacific Rim net sales increased $1.8 million or 27% for the year ended December 31, 2019. The increase was
driven by increased sales of embolectomy catheters of $0.9 million, AnastoClips of $0.3 million, occlusion catheters of $0.2
million and biologic vascular patches of $0.2 million. These and other increases were offset in part by decreased valvulotome
sales of $0.1 million.
Gross profit .................................................... $
79,853
$
($ in thousands)
73,939
$
5,914
2019
2018
Change
Gross margin ..................................................
68.1%
70.0%
(1.9%)
Percent
change
8%
*
* Not applicable
Gross Profit. Gross profit increased $5.9 million to $79.9 million for the year ended December 31, 2019, while gross
margin decreased by 190 basis points to 68.1% in the period. The gross margin was favorably impacted by higher average
selling prices across most product lines, as well manufacturing efficiencies. These increases were more than offset, however,
by an unfavorable product mix, including recently acquired products which typically have a lower gross margin prior to being
integrated into our Burlington manufacturing operations. Foreign exchange rate changes also had an unfavorable impact in
2019.
2019
2018
$ change
Percent
change
2019 as a
% of
2018 as a
% of
Net Sales Net Sales
($ in thousands)
Sales and marketing ................. $
General and administrative .......
Research and development .......
Gain on divestures and
acquisitions ...........................
$
30,339 $
19,055
9,276
27,318 $
17,689
8,197
3,021
1,366
1,079
-
58,670 $
(7,474)
45,730 $
7,474
12,940
11%
8%
13%
*
28%
26%
16%
8%
0%
50%
26 %
17 %
8 %
*
43 %
* Not a meaningful percentage.
Sales and marketing. For the year ended December 31, 2019, sales and marketing expense increased $3.0 million, or
11%, to $30.3 million. The increase was primarily driven by higher personnel costs, including compensation, commissions and
travel expenses associated with expanding our sales force. We also had higher costs due to the implementation of customer
relationship management software. As a percentage of net sales, sales and marketing expense was 26% in both 2019 and 2018.
General and administrative. For the year ended December 31, 2019, general and administrative expense increased $1.4
million, or 8%, to $19.1 million. General and administrative expense increases were primarily related to acquisition-related
costs including amortization of intangible assets, professional fees, bank and credit card fees, bad debt expense and facilities
costs. As a percentage of net sales, general and administrative expense was 16% for 2019 and 17% for 2018.
44
Research and development. For the year ended December 31, 2019, research and development expense increased $1.1
million, or 13%, to $9.3 million. Product development and process engineering increased $0.8 million on a combined basis, in
large part due to transitioning certain acquired products to our Burlington manufacturing operations. Clinical and regulatory
expenses increased $0.3 million, related to regulatory submissions for new products in geographies such as China and Japan,
and testing related to our biologic products.
Gain on divestitures and acquisitions. The 2018 gains on divestitures and acquisitions relate to the sale of our Reddick
cholangiogram catheter and Reddick-Saye screw product lines to Symmetry Surgical, which resulted in a gain of $5.9 million,
and also to our purchase of the Cardial assets from Becton Dickinson, which resulted in a bargain purchase gain of $1.6
million.
Other income (expense). Interest income was $0.7 million and $0.6 million, respectively for 2019 and 2018. Foreign
exchange losses on settlements or remeasurement of receivables and payables denominated in foreign currencies were $0.2
million and $0.4 million in 2019 and 2018, respectively.
Income tax expense. We recorded a provision for taxes of $3.7 million on pre-tax income of $21.7 million in 2019 as
compared to $5.5 million on pre-tax income of $28.4 million in 2018. The 2019 provision was comprised of a U.S. federal tax
provision of $2.0 million, a state tax provision of $0.4 million, and a foreign tax provision of $1.3 million. The 2018 provision
was comprised of a U.S. federal tax provision of $2.8 million, a state tax provision of $0.5 million and a foreign tax provision
of $2.2 million. Our effective tax rate differed from the U.S. statutory tax rate in 2019 principally because of stock option
exercises, taxes on foreign earnings, valuation allowances, and certain permanent differences. 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 assess the likelihood that our deferred tax assets will be realized through future taxable income and record a
valuation allowance to reduce gross deferred tax assets to an amount we believe is more likely than not to be realized. As of
December 31, 2019, we had provided a valuation allowance of $1.4 million for deferred tax assets primarily related to
Australian net operating loss and capital loss carry forwards and Massachusetts tax credit carry forwards that are not expected
to be realized.
Refer to Note 8 to our consolidated financial statements for additional information about income tax expense (benefit)
including information related to U.S. tax reform legislation.
Liquidity and Capital Resources
At December 31, 2020, we held $26.8 million in cash and cash equivalents and $0.2 million in a short-term managed
income mutual fund investment, as compared to $11.8 million in cash and cash equivalents and $20.9 million in the mutual
fund investment at December 31, 2019. 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. Our short-
term marketable securities consist of a managed income mutual fund investing mainly in short-term investment grade, U.S.-
dollar denominated fixed and floating-rate debt. All of our cash held outside of the U.S. is available for corporate use, with the
exception of $2.6 million held by subsidiaries in jurisdictions for which earnings are planned to be permanently reinvested.
On February 23, 2021, our Board of Directors authorized the repurchase of up to $15.0 million of the Company’s
common stock through transactions on the open market, in privately negotiated purchases or otherwise until February 22, 2022.
The repurchase program may be suspended or discontinued at any time. To date we have not made any repurchases under this
program.
In June 2020, in connection with the Artegraft acquisition, we incurred debt of $65 million including a five-year
revolving line of credit of $25 million and a five-year term loan of $40 million. The loans bear interest at either the Base Rate
as defined in the agreement plus an applicable margin of 1.25% to 1.75% depending on our consolidated leverage ratio, or the
Eurodollar Rate plus an applicable margin of 2.25% to 2.75% depending on our consolidated leverage ratio. At December 31,
2020 all outstanding borrowings or $39.0 million were designated as Eurodollar loans and had an interest rate of 3.5%.
The term of the revolving line of credit is five years and allows re-borrowing up to $25 million during the term, with all
outstanding amounts due on June 22, 2025. The term loan is repayable in increasing quarterly installments of from $0.5 million
to $1.0 million commencing September 30, 2020 through March 31, 2025, with the remaining outstanding balance due on June
45
22, 2025. During the year ended December 31, 2020, we made scheduled principal payments on the term loan of $1.0 million
and repaid the revolving line of credit in full.
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 $28.8 million for the year ended December 31, 2020, $21.2 million for the year
ended December 31, 2019 and $28.2 million for the year ended December 31, 2018. 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 product sales;
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, CE mark 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, repay outstanding
debt, pay dividends, 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 access our
available revolving credit facility. 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.
Cash Flows
2020
Year ended December 31,
2019
($ in thousands)
2018
Cash and cash equivalents .................... $
26,764 $
11,786 $
26,318
Cash flows provided by (used in):
Operating activities ....................... $
Investing activities ........................
Financing activities .......................
34,800 $
(52,891)
32,155
14,179 $
(24,100)
(4,622)
19,506
(7,055 )
(4,416 )
46
Net cash provided by operating activities. Net cash provided by operating activities was $34.8 million for the year ended
December 31, 2020, and consisted of $21.2 million net income, adjusted for non-cash items of $12.7 million (including
primarily depreciation and amortization of $8.4 million, stock-based compensation of $3.0 million, provisions for inventory
write-offs and doubtful accounts of $1.8 million, and fair value adjustments on contingent consideration for acquisitions of
$0.2 million, offset by a benefit from deferred taxes of $0.3 million, and a gain on the sale of a building of $0.5 million) as well
as cash from working capital of $0.9 million. The net cash generated from working capital was driven by increases in accounts
payable and other liabilities of $4.3 million, offset by increases in inventory and other deferred costs of $2.6 million and
accounts receivable of $0.9 million.
Net cash provided by operating activities was $14.2 million for the year ended December 31, 2019, and consisted of
$17.9 million net income, adjusted for non-cash items of $10.1 million (including primarily depreciation and amortization of
$5.4 million, stock-based compensation of $2.6 million, provisions for inventory write-offs and doubtful accounts of $1.1
million, a provision for deferred taxes of $0.8 million and fair value adjustments on contingent consideration for acquisitions of
$0.2 million), as well as working capital uses of $13.6 million. The net cash used for working capital was driven by increases
in inventory of $11.3 million, accounts receivable of $1.3 million, and other current assets of $0.7 million, as well as a decrease
in accounts payable and other liabilities of $0.3 million.
Net cash provided by operating activities was $19.5 million for the year ended December 31, 2018, and consisted of
$22.9 million net income, adjusted for non-cash items of $1.7 million (including primarily depreciation and amortization of
$4.3 million, stock-based compensation of $2.3 million, and provisions for inventory write-offs and doubtful accounts of $1.0
million, offset by a benefit for deferred taxes of $2.2 million and gains on acquisitions and divestitures of $7.5 million), as well
as working capital uses of $1.7 million. The net cash used for working capital was driven by increases in accounts receivable of
$1.3 million, inventory of $4.3 million and other current assets of $0.4 million, offset by an increase in accounts payable and
other liabilities of $4.3 million.
Net cash used in investing activities. Net cash used in investing activities was $52.9 million for the year ended
December 31, 2020, including acquisition-related payments of $72.6 million primarily associated with the purchase of
Artegraft and expenditures on property, equipment and technology of $3.0 million, offset by net sales and purchases of
marketable securities of $20.7 million and proceeds from the sale of the North Melbourne, Australia building of $2.0 million.
Net cash used in investing activities was $24.1 million for the year ended December 31, 2019, driven by cash paid for
acquisitions of $21.0 million, as well as purchases of property and equipment of $3.8 million primarily associated with biologic
clean room build-outs in Burlington. These investments were in part offset by net sales of short-term investments of $0.9
million.
Net cash used in investing activities was $7.1 million for the year ended December 31, 2018, driven by cash paid for
acquisitions of $12.3 million, as well as purchases of property and equipment of $3.1 million primarily associated with clean
room build-outs in Burlington. These investments were in part offset by proceeds from the Reddick divestiture of $7.4 million
and net sales of short-term investments of $0.9 million.
Net cash provided by (used in) financing activities. Net cash provided by financing activities was $32.2 million for the
year ended December 31, 2020, consisting primarily of borrowings of $63.2 million net of debt issuance costs and stock option
exercises proceeds of $5.4 million, net of shares repurchased to cover employee payroll taxes. These increases to cash were
partly offset by dividend payments of $7.7 million, debt payments of $26.0 million and deferred payments for acquisitions of
$2.8 million.
Net cash used in financing activities was $4.9 million for the year ended December 31, 2019, driven primarily by
dividend payments of $6.7 million and payments related to prior acquisitions of $2.3 million. We had proceeds from stock
option exercises of $4.9 million, offset by the acquisition of $0.7 million of treasury shares to cover minimum withholding
taxes on restricted stock unit vestings.
Net cash used in financing activities was $4.4 million for the year ended December 31, 2018, driven primarily by
dividend payments of $5.4 million and payments related to prior acquisitions of $1.2 million. We had proceeds from stock
option exercises of $3.0 million, offset by the acquisition of $0.7 million of treasury shares to cover minimum withholding
taxes on restricted stock unit vestings.
47
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 2020
March 3, 2020
May 20, 2020
August 27, 2020
November 19, 2020
March 19, 2020 $
June 4, 2020 $
September 10, 2020 $
December 3, 2020 $
Fiscal Year 2019
March 22, 2019
May 22, 2019
August 21, 2019
November 20, 2019
April 5, 2019 $
June 6, 2019 $
September 5, 2019 $
December 5, 2019 $
0.095 $
0.095 $
0.095 $
0.095 $
0.085 $
0.085 $
0.085 $
0.085 $
1,917
1,917
1,925
1,936
1,672
1,672
1,691
1,701
On February 23, 2021, our Board of Directors approved a quarterly cash dividend on our common stock of $0.11 per
share payable on March 25, 2021, to stockholders of record at the close of business on March 9, 2021, which will total
approximately $2.2 million.
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 accompanying notes. Our estimates and assumptions, including those related to
revenue recognition, inventories, intangible assets, 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. We also occasionally enter into consigned inventory
arrangements with either hospitals or distributors on a limited basis. Following our acquisition of the RestoreFlow allograft
business, we also derive revenues from human tissue cryopreservation services. These service 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 under the provisions of ASU 2014-09, Revenue from Contracts with Customers (Topic 606). The
core principle of Topic 606 is that an entity should recognize revenue to depict the transfer of goods or services to customers in
48
an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The
standard explains that to achieve the core principle, an entity should take the following actions:
Step 1: Identify the contract with a customer
Step 2: Identify the performance obligations in the contract
Step 3: Determine the transaction price
Step 4: Allocate the transaction price
Step 5: Recognize revenue when or as the entity satisfies a performance obligation
Revenue is recognized when or as a company satisfies a performance obligation by transferring a promised good or
service to a customer (which is when the customer obtains control of that good or service). In instances in which shipping and
handling activities are performed after a customer takes control of the goods (such as when title passes upon shipment from our
dock), we have made the policy election allowed under Topic 606 to account for these activities as fulfillment costs and not as
performance obligations.
We generally reference customer purchase orders to determine the existence of a contract. Orders that are not
accompanied by a purchase order are confirmed with the customer in writing or verbally. The purchase orders or similar
correspondence, once accepted, identify the performance obligations as well as the transaction price, and otherwise outline the
rights and obligations of each party. We allocate the transaction price of each contract among the performance obligations in
accordance with the pricing of each item specified on the purchase order, which is in turn based on standalone selling prices
per our published price lists. In cases where we discount products or provide certain items free of charge, we allocate the
discount proportionately to all performance obligations, unless it can be demonstrated that the discount should be allocated
entirely to one or more, but not all, of the performance obligations.
We record revenue, net of allowances for returns and discounts, fees paid to group purchasing organizations, and any
sales and value added taxes required to be invoiced, which we have elected to exclude from the measurement of the transaction
price as allowed by the standard, at the time of shipment (taking into consideration contractual shipping terms), or in the case
of consigned inventory, when it is consumed. Shipment is the point at which control of the product and title passes to our
customers, and at which LeMaitre has a present right to receive payment for the goods.
We do not carry any contract assets or contract liabilities, as there are generally no unbilled amounts due from customers
under contracts for which we have partially satisfied performance obligations, or amounts received from customers for which
we have not satisfied performance obligations. We satisfy our performance obligations under revenue contracts within a short
time period from receipt of the orders, and payments from customers are typically received within 30 to 60 days of fulfillment
of the orders, except in certain geographies such as Spain and Italy where the payment cycle is customarily longer.
Accordingly, there is no significant financing component to our revenue contracts. Additionally, we have elected as a policy
that incremental costs (such as commissions) incurred to obtain contracts are expensed as incurred, due to the short-term nature
of the contracts.
Customers returning products may be 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, which requires judgment. Our cost of replacing defective products has not been material and is
accounted for at the time of replacement.
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
49
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 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 U.S. 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.
Valuation of Intangible Assets and Goodwill
Intangible assets consist primarily of purchased developed technology, patents, customer relationships and trademarks,
and are amortized over their estimated useful lives, ranging from 2 to 16 years. Goodwill represents the amount of
consideration paid in connection with business acquisitions in excess of the fair value of assets acquired and liabilities
assumed. 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 $58.9 million as of
December 31, 2020 and $24.9 million as of December 31, 2019. Goodwill was $65.9 million as of December 31, 2020 and
$40.0 million as of December 31, 2019.
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, business acquisitions, employment, commercial matters, intellectual property matters, 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, 2020, 2019, and 2018, we were not subject to any
material litigation, claims or assessments.
In connection with certain of our acquisitions, we may enter into agreements to pay additional future consideration upon
the satisfaction of certain agreed-upon criteria. We record liabilities for these arrangements at estimated fair value reflecting
management’s assumptions of the likelihood of achieving the specified criteria at the time of the closing, which may require
significant judgment. These amount are remeasured each reporting period, with any adjustments recorded in income from
operations.
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.
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.
50
Our policy is to classify interest and penalties related to unrecognized tax benefits as income tax expense.
Recent Accounting Pronouncements
In June 2016, the FASB issued ASU 2016-13 Financial Instruments – Credit Losses (Topic 326), which requires a
financial asset (or group of financial assets) measured at amortized cost to be presented at the net amount expected to be
collected. The allowance for credit losses is a valuation account that is deducted from the amortized cost basis of the financial
asset(s) to present the net carrying value at the amount expected to be collected on the financial asset. The measurement of
expected credit losses is based on relevant information about past events, including historical experience, current conditions
and reasonable, supportable forecasts that affect the collectability of the reported amount, and requires judgment in determining
relevant information and estimation methods. The new standard was effective for us beginning January 1, 2020. The adoption
of this standard did not have a material impact on our financial statements, as the only financial assets we have that are affected
by the standard are trade receivables for which we have historically employed a collectability estimation technique.
In August 2018, the FASB issued ASU 2018-13 Fair Value Measurement (Topic 820), which modifies the disclosure
requirements for fair value measurements. The new standard was effective for us beginning January 1, 2020, with early
adoption permitted. The adoption of this standard did not have a material impact on our financial statements.
In January 2017, the FASB issued ASU 2017-04 Intangibles – Goodwill and Other (Topic 350), which, among other
provisions, eliminates “step 2” from the goodwill impairment test. The annual, or interim, goodwill impairment test will be
performed by comparing the fair value of a reporting unit with its carrying amount. An impairment charge should be
recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized
should not exceed the total amount of goodwill allocated to that reporting unit. The new standard was effective for us
beginning January 1, 2020, with early adoption permitted. The adoption of this standard did not have a material impact on our
financial statements.
In December 2019, the FASB issued ASU 2019-12 Income Taxes (Topic 740), which simplifies the accounting for
income taxes by removing certain exceptions to the general principles in Topic 740 as well as clarifying and amending other
areas of existing GAAP under Topic 740. The new standard is effective for us beginning January 1, 2021, with early adoption
permitted. The adoption of this standard is not expected to have a material impact on our financial statements.
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.
Foreign Currency Risk
During fiscal 2020 and 2019, 42% and 46%, respectively, of our total revenue was from customers outside of the U.S. In
addition, a significant portion of our operating costs incurred outside the U.S. 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 did not do so during 2020 or 2019. Our largest exposures to foreign currency exchange rates exist primarily with
the Euro, British pound, Canadian dollar, Australian dollar and Japanese yen.
During the years ended December 31, 2020 and 2019, we recorded $0.3 million and $0.2 million of net foreign currency
exchange losses, respectively, 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 $1.5 million for 2020.
51
Interest Rate Risk
At December 31, 2020, we held $26.8 million in cash and cash equivalents and $0.2 million in a short-term managed
income mutual fund investment. 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. We also have
exposure to floating interest rates through our senior secured credit facility, as the interest expense related to any borrowings
will fluctuate with changes in Eurodollar and other benchmark rates. Therefore, increases in interest rates may reduce our net
income or loss by increasing the cost of carrying debt.
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, which are incorporated by reference herein.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Not Applicable.
52
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. We design our disclosure controls and procedures to ensure, at reasonable assurance levels, that
such information is timely recorded, processed, summarized and reported, and then accumulated and communicated
appropriately.
Based on an evaluation of our disclosure controls and procedures as of December 31, 2020, our Chief Executive Officer
and Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures were effective at reasonable
assurance levels.
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, 2020.
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.
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, 2020.
Our internal control over financial reporting as of December 31, 2020 has been audited by Grant Thornton LLP, an
independent registered public accounting firm, as stated in their respective report which is included herein.
Changes in 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, 2020 that has materially affected, or is reasonably likely to materially affect our internal control over financial
reporting.
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.
53
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors and Stockholders
LeMaitre Vascular, Inc.
Opinion on internal control over financial reporting
We have audited the internal control over financial reporting of LeMaitre Vascular, Inc. (a Delaware corporation) and
subsidiaries (the “Company”) as of December 31, 2020, based on criteria established in the 2013 Internal Control—Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). In our opinion, the
Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2020,
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)
(“PCAOB”), the consolidated financial statements of the Company as of and for the year ended December 31, 2020, and our
report dated March 12, 2021 expressed an unqualified opinion on those financial statements.
Basis for opinion
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. Our responsibility is to express an opinion on the Company’s internal
control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are
required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable
rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. 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.
Definition and limitations of internal control over financial reporting
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.
/s/ GRANT THORNTON LLP
Boston, Massachusetts
March 12, 2021
54
Item 9B. Other Information
Not Applicable.
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 2021 definitive proxy statement (2021 Definitive Proxy Statement) for the 2021
annual meeting of stockholders to be filed with the Securities and Exchange Commission within 120 days after the fiscal year
ended December 31, 2020.
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 “Delinquent Section 16(a) Reports” in our 2021
Definitive Proxy Statement, to the extent required to be included.
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 2021 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 2021 Definitive Proxy Statement.
Equity Compensation Plan Information
The following table sets forth information regarding our equity compensation plans in effect as of December 31, 2020.
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.
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)
Plan category
Equity compensation plans approved by security
holders ........................................................................
1,078,855 $
28.50
860,847
(a)
(b)
(c)
Equity compensation plans not approved by security
holders ........................................................................
-
-
-
Total ...........................................
1,078,855 $
28.50
860,847
55
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 2021 Definitive
Proxy Statement.
Item 14. Principal Accountant 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 2021 Definitive Proxy Statement.
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) All financial statement schedules are omitted because they are not applicable or the required information is shown
in the financial statements or notes thereto.
(3) Exhibits
Exhibit
Number
2.1
2.2
2.3
2.1^
3.1
3.2
3.3
Exhibit Description
Incorporated By Reference
Form
Date
SEC File
Number
Filed
Herewith
Asset Purchase Agreement dated November 10, 2016 between the
Registrant, Restore Flow Allografts, LLC and certain individuals
named therein.
10-K
3/9/18 001-33092
Asset Purchase Agreement dated September 20, 2018 between the
Registrant and Applied Medical Resources Corporation
10-Q
11/2/18
001-33092
Asset Purchase Agreement dated October 11, 2019 between the
Registrant and Admedus Ltd and certain of its subsidiaries
10-K
3/12/20 001-33092
Asset Purchase Agreement, dated June 22, 2020, by and between
the Company and Artegraft, Inc.
8-K
6/24/20
001-33092
Amended and Restated By-laws of the Registrant
S-1/A 5/26/06
001-33092
Second Amended and Restated Certificate of Incorporation of the
Registrant
10-K
3/29/10
001-
33092
Amendment to Second Amended and Restated Certificate of
Incorporation of the Registrant
8-K
6/15/12
001-33092
56
Exhibit
Number
Exhibit Description
Incorporated By Reference
Form
Date
SEC File
Number
Filed
Herewith
4.1
4.2
10.1
Specimen Certificate evidencing shares of common stock
Description of Securities Registered pursuant to Section 12 of the
Securities Exchange Act of 1934, as amended
10-K
3/12/20 001-33092
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
10.2
Director Compensation Policy
S-1
4/25/06
333-133532
3/27/12
001-
33092
10-K
10.3†
10.4†
10.5†
10.6†
10.7
10.8
10.9
Executive Retention and Severance Agreement dated October 10,
2005, by and between the Registrant and George W. LeMaitre
S-1/A 5/26/06
333-
133532
Employment Agreement dated June 20, 2006, by and between the
Registrant and David Roberts
S-1/A 6/22/06
333-
133532
Employment Agreement dated April 20, 2006, by and between the
Registrant and Joseph P. Pellegrino
S-1/A 6/22/06
333-
133532
Form of Indemnification Agreement between the Registrant and its
directors and executive officers
S-1/A 5/26/06
333-133532
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
8-K
6/15/07
001-33092
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
8-K
4/10/08
001-33092
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
10-K
3/31/09
001-33092
10.10†
First Amendment to Executive Retention and Severance
Agreement dated December 23, 2008, by and between the
Registrant and George W. LeMaitre
10-K
3/31/09
001-33092
10.11†
First Amendment to Employment Agreement dated December 19,
2008, by and between the Registrant and David Roberts
10-K
3/31/09
001-33092
10.12†
First Amendment to Employment Agreement dated December 19,
2008, by and between the Registrant and Joseph P. Pellegrino
10-K
3/31/09
001-33092
10.13
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
10-K
3/29/10
001-33092
57
Exhibit
Number
10.14
10.15
10.16
10.17
Exhibit Description
Incorporated By Reference
Form
Date
SEC File
Number
Filed
Herewith
Northwest Park Lease dated March 23, 2010, by and between
Rodger P. Nordblom and Peter C. Nordblom, as Trustees of
Northwest Associates, and Registrant
10-K
3/29/10
001-
33092
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
10-K
3/27/12
001-33092
10-K
3/27/12
001-33092
10-K
3/27/13
001-33092
10.18
Lease dated December 20, 2013, by and between N.W. Building 3
Trust and Registrant
8-K
12/23/13
001-33092
10.19
10.20
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
8-K
12/23/13
001-
33092
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
8-K
12/23/13
001-33092
10.21†
Amended and Restated Management Incentive Compensation Plan 8-K
2/25/14
001-33092
10.22†
Third Amended and Restated 2006 Stock Option and Incentive
Plan
8-K
6/8/15
001-33092
10.23†
Separation Agreement dated June 7, 2017 between Peter R.
Gebauer and LeMaitre Vascular GmbH
8-K
8/3/17
001-33092
10.24†
Transition and Employment Agreement dated June 7, 2017
between Peter R. Gebauer and the Registrant
8-K
8/3/17
001-33092
10.25†
Form of Restricted Stock Unit Award Agreement under the
LeMaitre Vascular, Inc. 2006 Stock Option And Incentive Plan
8-K
3/9/18
001-33092
10.26†
Form of Incentive Stock Option Agreement under the LeMaitre
Vascular, Inc. 2006 Stock Option And Incentive Plan
10-K
3/9/18 001-33092
10.27†
Form of Non-Qualified Stock Option Agreement (Employees)
under the LeMaitre Vascular, Inc. 2006 Stock Option And
Incentive Plan
10-K
3/9/18 001-33092
10.28
Form of Non-Qualified Stock Option Agreement (Non-Employee
Directors) under the LeMaitre Vascular, Inc. 2006 Stock Option
And Incentive Plan
10-K
3/9/18 001-33092
58
Exhibit
Number
Exhibit Description
Incorporated By Reference
Form
Date
SEC File
Number
Filed
Herewith
10.29
Asset Purchase Agreement between the Registrant and Specialty
Surgical Instrumentation, Inc. dated April 5, 2018.
10-Q
5/4/18
001-33092
10.30
License Agreement dated October 11, 2019 between the
Registrant and Admedus Ltd and certain of its subsidiaries
10-K
3/12/20
000-33092
10.31
First Amendment of Lease dated October 29, 2019 between
NWP BUILDING 3 LLC and the Registrant
8-K
11/1/19 001-33092
10.32
Fifth Amendment of Lease dated October 29, 2019 between
NWP BUILDING 4 LLC and the Registrant
8-K
11/1/19
001-33092
10.33
Seventh Amendment of Lease dated October 29, 2019 between
NWP BUILDING 5 LLC and the Registrant
8-K
11/1/19
001-33092
10.34
Lease dated November 26, 2019 between NWP Retail 18 LLC
and the Registrant.
8-K
12/3/19
001-33092
10.35
10.36
Credit Agreement dated June 22, 2020, by and among the
Company, the lenders from time to time party thereto and
KeyBank National Association, as administrative agent.
8-K
6/24/20
001-33092
Security Agreement, dated June 22, 2020, by and among the
Company, each additional grantor that becomes a party thereto
and KeyBank National Association, as collateral agent.
8-K
6/24/20
001-33092
21.1
List of Subsidiaries
23.1
Consent of Grant Thornton LLP
24.1
31.1
31.2
32.1*
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)
X
X
X
X
X
X
59
Exhibit
Number
32.2*
Exhibit Description
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
Inline XBRL Instance Document.
101.SCH Inline XBRL Taxonomy Extension Schema Document.
101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase
Document.
101.DEF Inline XBRL Taxonomy Extension Definition Linkbase
Document.
101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document.
101.PRE Inline XRBL Taxonomy Extension Presentation Linkbase
Document.
104
Cover Page Interactive Data File (formatted as Inline XBRL and
contained in Exhibit 101).
Incorporated By Reference
Form
Date
SEC File
Number
Filed
Herewith
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.
Portions of the exhibit (indicated by “[***]”) have been omitted because they are not material and would likely cause
competitive harm to the Registrant if disclosed.
Item 16. Form 10-K Summary.
Not applicable.
60
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 12, 2021.
SIGNATURES
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
/s/ JOSEPH P. PELLEGRINO, JR.
Joseph P. Pellegrino, Jr.
Chief Executive Officer and
Chairman of the Board
(Principal Executive Officer)
March 12, 2021
Chief Financial Officer (Principal
Financial and Accounting
Officer) and Director
March 12, 2021
/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/ BRIDGET A. ROSS
Bridget A. Ross
Director
Director
March 12, 2021
March 12, 2021
President and Director
March 12, 2021
March 12, 2021
March 12, 2021
Director
Director
61
INDEX TO FINANCIAL STATEMENTS
LeMaitre Vascular, Inc.
Consolidated Financial Statements
Report of Independent Registered Public Accounting Firm..............................................................................................
Consolidated Balance Sheets as of December 31, 2020 and 2019 ....................................................................................
Consolidated Statements of Operations for the Years Ended December 31, 2020, 2019 and 2018 ..................................
Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2020, 2019 and 2018 .............
Consolidated Statements of Stockholders’ Equity for the Years Ended December 31, 2020, 2019 and 2018 ..................
Consolidated Statements of Cash Flows for the Years Ended December 31, 2020, 2019 and 2018 .................................
Notes to Consolidated Financial Statements .....................................................................................................................
Page
F-2
F-4
F-5
F-6
F-7
F-8
F-9
F-1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors and Shareholders
LeMaitre Vascular, Inc.
Opinion on the financial statements
We have audited the accompanying consolidated balance sheets of LeMaitre Vascular, Inc. (a Delaware corporation) and
subsidiaries (the “Company”) as of December 31, 2020 and 2019, the related consolidated statements of operations,
comprehensive income, changes in shareholders’ equity, and cash flows for each of the three years in the period ended
December 31, 2020, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial
statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and
the results of its operations and its cash flows for each of the three years in the period ended December 31, 2020, 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)
(“PCAOB”), the Company’s internal control over financial reporting as of December 31, 2020, 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 12, 2021 expressed an unqualified opinion.
Basis for opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on
the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are
required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable
rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due
to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial
statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included
examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included
evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall
presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical audit matters
The critical audit matters communicated below are matters arising from the current period audit of the financial statements that
were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that
are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The
communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and
we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on
the accounts or disclosures to which they relate.
Evaluation of the acquisition-date fair value of contingent consideration
As discussed in Notes 2 and 13 to the consolidated financial statements, on June 22, 2020 the Company acquired Artegraft, Inc.
for a total purchase price of $72.9 million. The acquisition agreement included a contingent consideration provision based on
the volume of units sold in each of the three years post-acquisition, individually and in the aggregate, with potential total
consideration of $17.5 million. We identified the evaluation of the acquisition-date fair value of the contingent consideration as
a critical audit matter.
The principal consideration for our determination that the evaluation of the acquisition-date fair value of the contingent
consideration is a critical audit matter is that a high degree of subjective auditor judgment was required in evaluating certain
inputs to the Monte Carlo model used to determine the fair value of the contingent consideration. Specifically, the key inputs
included forecasted unit sales and the volatility of unit sales. There was limited observable market information, and the
calculated fair value of the contingent consideration was sensitive to possible changes to these key inputs.
F-2
The primary procedures we performed to address this critical audit matter included the following:
● We tested internal controls over the Company’s acquisition-date valuation process, including controls over the key inputs
●
●
listed above.
In connection with our assessment of the unit sale forecasts used in the valuation, we compared forecasted unit sale growth
rates to historical actual results, prior acquisitions and projected industry growth rates.
In addition, we involved valuation professionals with specialized skills and knowledge, who assisted in:
o
o
o
evaluating the valuation approach used by the Company to calculate the fair value of contingent consideration;
comparing the selected volatility used against publicly available volatility of comparable companies; and
developing estimates of the fair values of the contingent consideration using independently obtained external
information and comparing the results to the Company’s fair value estimates.
Evaluation of acquisition-date fair value of customer relationships and developed technology intangible assets
As discussed in Note 2 to the consolidated financial statements, on June 22, 2020 the Company acquired Artegraft, Inc. for a
total purchase price of $72.9 million. The Company accounted for this acquisition under the acquisition method of accounting
for business combinations. In connection with the transaction, the Company recorded customer relationships and developed
technology intangible assets (collectively, the "intangible assets") of $21.3 million and $16.5 million, respectively. We
identified the evaluation of the acquisition-date fair value of the intangible assets acquired in the Artegraft, Inc. transaction as a
critical audit matter.
The principal consideration for our determination that the fair value of the intangible assets is a critical audit matter is that a
high degree of subjective auditor judgement was required in evaluating certain assumptions used in the valuation methods to
calculate the fair value of the intangible assets. The valuation models included a number of internally developed assumptions
for which there was limited observable market information, and the calculated fair value of such assets was sensitive to
possible changes to the following key assumptions: obsolescence curve, royalty rates and annual customer attrition rate.
The primary procedures we performed to address this critical audit matter included the following:
● We tested internal controls over the Company’s acquisition-date valuation process, including controls over the
development of the key assumptions.
● We also evaluated the annual customer attrition rate by examining the Company’s historical customer attrition data as
●
well as comparing attrition rates to prior acquisitions.
In addition, we involved valuation professionals with specialized skills and knowledge, who assisted in:
o
o
evaluating the valuation approach used by the Company to calculate the fair value of the intangible assets;
evaluating the obsolescence curve (and the resulting economic useful life) assumption, based on the qualitative
support provided by management and comparing it to market surveys for useful lives of similar assets; and
evaluating the selected royalty rate against market data of comparable licensing agreements, and the Company’s
historical licensing agreements as well as independently analyzed the profit split used.
o
/s/ GRANT THORNTON LLP
We have served as the Company’s auditor since 2015.
Boston, Massachusetts
March 12, 2021
F-3
LeMaitre Vascular, Inc.
Consolidated Balance Sheets
December 31, December 31,
2020
2019
(in thousands, except share data)
Assets
Current assets:
Cash and cash equivalents ............................................................................................... $
Short-term marketable securities .....................................................................................
Accounts receivable, net of allowances of $623 at December 31, 2020, and $522 at
December 31, 2019 ......................................................................................................
Inventory and other deferred costs...................................................................................
Prepaid expenses and other current assets .......................................................................
Total current assets ..............................................................................................................
Property and equipment, net ................................................................................................
Right-of-use leased assets ...................................................................................................
Goodwill..............................................................................................................................
Other intangibles, net ..........................................................................................................
Deferred tax assets ..............................................................................................................
Other assets .........................................................................................................................
Total assets .......................................................................................................................... $
Liabilities and stockholders’ equity
Current liabilities:
Current portion of long-term debt .................................................................................... $
Revolving line of credit ...................................................................................................
Accounts payable .............................................................................................................
Accrued expenses ............................................................................................................
Acquisition-related obligations ........................................................................................
Lease liabilities - short-term ............................................................................................
Total current liabilities ........................................................................................................
Long-term debt, net .............................................................................................................
Lease liabilities - long-term .................................................................................................
Deferred tax liabilities .........................................................................................................
Other long-term liabilities ...................................................................................................
Total liabilities ....................................................................................................................
26,764 $
214
19,552
45,115
2,618
94,263
15,036
16,066
65,945
58,905
1,686
909
252,810 $
2,500 $
-
2,394
17,525
772
1,954
25,145
35,532
14,791
127
4,643
80,238
11,786
20,895
16,572
39,527
3,312
92,092
14,854
15,208
39,951
24,893
1,084
259
188,341
-
-
2,604
14,014
2,476
1,757
20,851
-
13,955
1,179
4,215
40,200
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 22,061,554
shares at December 31, 2020, and 21,678,927 shares at December 31, 2019 ..............
Additional paid-in capital ................................................................................................
Retained earnings ............................................................................................................
Accumulated other comprehensive loss ..........................................................................
Treasury stock, at cost; 1,538,572 shares at December 31, 2020 and 1,522,035 shares
at December 31, 2019 ..................................................................................................
Total stockholders’ equity ...................................................................................................
Total liabilities and stockholders’ equity ............................................................................ $
-
-
221
114,924
70,554
(1,525)
(11,602)
172,572
252,810 $
217
105,934
57,029
(4,007)
(11,032)
148,141
188,341
See accompanying notes to consolidated financial statements.
F-4
LeMaitre Vascular, Inc.
Consolidated Statements of Operations
2020
Year ended December 31,
2019
(in thousands, except per share data)
2018
Net sales ................................................................................................ $
Cost of sales ..........................................................................................
129,366 $
44,748
117,232 $
37,379
105,568
31,629
Gross profit ...........................................................................................
84,618
79,853
73,939
Sales and marketing ..............................................................................
General and administrative ....................................................................
Research and development ....................................................................
Gains on sales of assets and acquisitions ..............................................
Total operating expenses .......................................................................
23,700
22,501
10,099
(470)
55,830
30,339
19,055
9,276
-
58,670
27,318
17,689
8,197
(7,474)
45,730
Income from operations ........................................................................
28,788
21,183
28,209
Other income (expense):
Interest income ..................................................................................
Interest expense .................................................................................
Foreign currency loss .........................................................................
Income before income taxes ..................................................................
Provision for income taxes ....................................................................
207
(1,310)
(329)
27,356
6,136
698
-
(202)
631
(2)
(394)
21,679
3,745
28,444
5,501
Net income ............................................................................................ $
21,220 $
17,934 $
22,943
Earnings per share of common stock:
Basic .................................................................................................. $
Diluted ............................................................................................... $
1.05 $
1.04 $
0.91 $
0.88 $
1.18
1.13
Weighted-average shares outstanding:
Basic ..................................................................................................
Diluted ...............................................................................................
20,246
20,479
19,813
20,326
19,426
20,242
Cash dividends declared per common share ......................................... $
0.38 $
0.34 $
0.28
See accompanying notes to consolidated financial statements.
F-5
LeMaitre Vascular, Inc.
Consolidated Statements of Comprehensive Income
Year ended December 31,
2019
2018
2020
Net income ............................................................................................ $
Other comprehensive income (loss):
Foreign currency translation adjustment, net .....................................
Unrealized gain (loss) on short-term marketable securities ...............
Total other comprehensive income (loss) .............................................
21,220 $
17,934 $
22,943
2,468
14
2,482
(234)
127
(107)
(1,626)
15
(1,611)
Comprehensive income ......................................................................... $
23,702 $
17,827 $
21,332
See accompanying notes to consolidated financial statements.
F-6
LeMaitre Vascular, Inc.
Consolidated Statements of Stockholders’ Equity
(in thousands, except share data)
Common Stock
Shares
Additional
Paid-in
Amount Capital
Retained Comprehensive Treasury Stock
Earnings Income (Loss) Shares
Amount Equity
Total
Stockholders’
Accumulated
Other
Balance at December 31,
2017 ....................................... 20,745,041 $
207 $
93,127 $ 28,333 $
(2,289) 1,480,101 $ (9,608) $
109,770
Net income ................................
Other comprehensive income ....
Issuance of common stock for
stock options exercised ..........
Vested restricted stock units ......
Stock-based compensation
expense ..................................
Repurchase of common stock at
cost ........................................
Common stock cash dividend
paid ........................................
22,943
(1,611)
303,379
61,804
4
-
2,966
-
2,349
22,943
(1,611)
2,970
-
2,349
21,410
(741)
(741)
(5,445)
(5,445)
Balance at December 31,
2018 ....................................... 21,110,224
211
98,442 45,831
(3,900) 1,501,511 (10,349)
130,235
Net income ................................
Other comprehensive income ....
Issuance of common stock for
stock options exercised ..........
Vested restricted stock units ......
Stock-based compensation
expense ..................................
Repurchase of common stock at
cost ........................................
Common stock cash dividend
paid ........................................
17,934
(107)
509,693
59,010
6
-
4,850
-
2,642
17,934
(107)
4,856
-
2,642
20,524
(683)
(683)
(6,736)
(6,736)
Balance at December 31,
2019 ..................................... 21,678,927
217
105,934 57,029
(4,007) 1,522,035 (11,032)
148,141
Net income ................................
Other comprehensive income ....
Issuance of common stock for
stock options exercised ..........
Vested restricted stock units ......
Stock-based compensation
expense ..................................
Repurchase of common stock at
cost ........................................
Common stock cash dividend
paid ........................................
21,220
2,482
331,958
50,669
3
1
5,968
-
3,022
21,220
2,482
5,971
1
3,022
16,537
(570)
(570)
(7,695)
(7,695)
Balance at December 31,
2020 ....................................... 22,061,554 $
221 $ 114,924 $ 70,554 $
(1,525) 1,538,572 $ (11,602) $
172,572
See accompanying notes to consolidated financial statements.
F-7
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 .....
Provision for doubtful accounts and allowances ............................
Provision for inventory write-downs .............................................
Provision (benefit) for deferred income taxes ................................
Gains on sale of building, acquisitions and divestitures.................
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 ...................................................
Proceeds from sale of building ..............................................................
Payments related to acquisitions ...........................................................
Purchases of short-term marketable securities ......................................
Proceeds from sales of marketable securities ........................................
Proceeds from divestitures ....................................................................
Net cash used in investing activities ......................................................
Financing activities
Payment of deferred acquisition consideration .....................................
Proceeds from revolving line of credit ..................................................
Proceeds from issuance of long-term debt ............................................
Payments of revolving line of credit .....................................................
Payments of long-term debt ..................................................................
Payment of deferred debt issuance costs ...............................................
Proceeds from issuance of common stock.............................................
Purchase of treasury stock .....................................................................
Common stock cash dividend paid ........................................................
Net cash provided by (used in) financing activities ..............................
Effect of exchange rate changes on cash and cash equivalents .............
Net increase (decrease) in cash and cash equivalents ............................
Cash and cash equivalents at beginning of year ....................................
Cash and cash equivalents at end of year .............................................. $
Supplemental disclosures of cash flow information (see Notes 6 and
9). .......................................................................................................
2020
Year ended December 31,
2019
(in thousands)
2018
21,220 $
17,934 $
22,943
8,395
3,022
182
293
1,523
(328)
(470)
100
(939)
(2,609)
89
4,322
34,800
(2,982)
2,023
(72,627)
(2,205)
22,900
-
(52,891)
(2,800)
25,000
40,000
(25,000)
(1,000)
(1,751)
5,971
(570)
(7,695)
32,155
914
14,978
11,786
26,764 $
5,416
2,642
171
388
747
824
-
(57)
(1,301)
(11,335)
(654)
(596)
14,179
(3,761)
-
(21,240)
(22,699)
23,600
-
(24,100)
(2,059)
-
-
-
-
-
4,856
(683)
(6,736)
(4,622)
11
(14,532)
26,318
11,786 $
4,324
2,349
(29)
264
671
(2,152)
(7,474)
259
(1,283)
(4,262)
(418)
4,314
19,506
(3,054)
-
(12,282)
(19,619)
20,500
7,400
(7,055)
(1,199)
-
-
-
-
-
2,969
(741)
(5,445)
(4,416)
(813)
7,222
19,096
26,318
See accompanying notes to consolidated financial statements.
F-8
LeMaitre Vascular, Inc.
Notes to Consolidated Financial Statements
December 31, 2019
1. Significant Accounting Policies and Related Matters
Description of Business
Unless the context requires otherwise, references to LeMaitre, 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: anastomotic clips,
angioscopes, biologic vascular and dialysis grafts, biologic vascular and cardiac patches, carotid shunts, embolectomy
catheters, occlusion catheters, powered phlebectomy devices, radiopaque marking tape, remote endarterectomy devices,
surgical glue, synthetic vascular grafts and valvulotomes. Our offices and production facilities are located in Burlington,
Massachusetts; Fox River Grove, Illinois; North Brunswick, New Jersey (Note 2); Chandler, Arizona; Vaughan, Canada;
Sulzbach, Germany; Milan, Italy; Madrid, Spain; Saint-Etienne, France; Hereford, England; Kensington, Australia; Tokyo,
Japan; Shanghai, China; and Singapore.
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, Bio Nova International Pty Ltd, LeMaitre
Vascular, Ltd., LeMaitre Medical Technology (Shanghai) Co. Ltd, LeMaitre Cardial SAS and LeMaitre Vascular Singapore
Pte 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 management to make estimates and assumptions that affect the amounts reported in in our consolidated financial
statements and accompanying notes. Due to the COVID-19 pandemic, there is heightened volatility and uncertainty in
customer demand and the worldwide economy in general. However, the magnitude and duration of the impact on our revenues
and operations from COVID-19 is uncertain and cannot currently be reasonably estimated at this time. The Company is not
aware of any specific event or circumstance that would require an update to its accounting estimates or adjustments to the
carrying value of its assets and liabilities as of March 12, 2021, the issuance date of this Annual Report on Form 10-K. Actual
results could differ from those estimates, particularly if the Company experiences material impacts to the carrying value of its
assets and liabilities from COVID-19.
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 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
F-9
provided and the tissue has been shipped to the customer, provided all other revenue recognition criteria discussed in the
succeeding paragraph have been met.
We record revenue under the provisions of ASU 2014-09, Revenue from Contracts with Customers (Topic 606). The core
principle of Topic 606 is that an entity should recognize revenue to depict the transfer of goods or services to customers in an
amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The
standard explains that to achieve the core principle, an entity should take the following actions:
Step 1: Identify the contract with a customer
Step 2: Identify the performance obligations in the contract
Step 3: Determine the transaction price
Step 4: Allocate the transaction price
Step 5: Recognize revenue when or as the entity satisfies a performance obligation
Revenue is recognized when or as a company satisfies a performance obligation by transferring a promised good or
service to a customer (which is when the customer obtains control of that good or service). In instances in which shipping and
handling activities are performed after a customer takes control of the goods (such as when title passes upon shipment from our
dock), we have made the policy election allowed under Topic 606 to account for these activities as fulfillment costs and not as
performance obligations.
We generally reference customer purchase orders to determine the existence of a contract. Orders that are not
accompanied by a purchase order are confirmed with the customer either in writing or verbally. The purchase orders or similar
correspondence, once accepted, identify the performance obligations as well as the transaction price, and otherwise outline the
rights and obligations of each party. We allocate the transaction price of each contract among the performance obligations in
accordance with the pricing of each item specified on the purchase order, which is in turn based on standalone selling prices
per our published price lists. In cases where we discount products or provide certain items free of charge, we allocate the
discount proportionately to all performance obligations, unless it can be demonstrated that the discount should be allocated
entirely to one or more, but not all, of the performance obligations.
We record revenue, net of allowances for returns and discounts, fees paid to group purchasing organizations, and any
sales and value added taxes required to be invoiced, which we have elected to exclude from the measurement of the transaction
price as allowed by the standard, at the time of shipment (taking into consideration contractual shipping terms), or in the case
of consigned inventory, when it is consumed. Shipment is the point at which control of the product and title passes to our
customers, and at which LeMaitre has a present right to receive payment for the goods.
Below is a disaggregation of our revenue by major geographic area, which is among the primary categorizations used by
management in evaluating financial performance, for the periods indicated (in thousands):
Americas ......................................................................... $
Europe, Middle East and Africa ......................................
Asia/Pacific Rim .............................................................
Total ............................................................................. $
81,470 $
39,193
8,703
129,366 $
69,359
39,480
8,393
117,232
Year ended December 31,
2019
2020
We do not carry any contract assets or contract liabilities, as there are generally no unbilled amounts due from customers
under contracts for which we have partially satisfied performance obligations, or amounts received from customers for which
we have not satisfied performance obligations. We satisfy our performance obligations under revenue contracts within a very
short time period from receipt of the orders, and payments from customers are typically received within 30 to 60 days of
fulfillment of the orders, except in certain geographies such as Spain and Italy where the payment cycle is customarily longer.
Accordingly, there is no significant financing component to our revenue contracts. Additionally, we have elected as a policy
that incremental costs (such as commissions) incurred to obtain contracts are expensed as incurred, due to the short-term nature
of the contracts.
F-10
Customers returning products may be 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, which requires judgment. 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:
2020
Year ended December 31,
2019
(in thousands)
2018
Advertising expense .................................. $
216 $
286 $
299
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.
Short-term Marketable Securities
Our short-term marketable securities are available-for-sale securities carried at fair value, with unrealized gains and
losses recorded in other comprehensive income.
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 $13.7 million as of December 31, 2020.
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.
F-11
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, particularly in Italy and Spain, may be subject to significant payment delays due to
government austerity measures impacting funding and payment practices. As of December 31, 2020 our receivables in Italy
and Spain totaled $0.9 million and $0.6 million, respectively. Receivables balances with certain government-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, 2020, 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 (recoveries) charged
of Period
to Income
Additions
Deductions Balance at
from
End of
Reserves Period
Allowance for doubtful accounts and sales returns:
Year ended December 31, 2020 ........................................ $
Year ended December 31, 2019 ........................................
Year ended December 31, 2018 ........................................
522 $
399
349
Fair Value of Financial Instruments
(in thousands)
293 $
388
264
192 $
265
214
623
522
399
Our financial instruments include cash and cash equivalents, short-term marketable securities, accounts receivable and
trade payables. The fair value of these instruments approximates their carrying value based upon their short-term nature or
variable rates of interest. Unrealized gains and losses on our short-term marketable securities are recorded in other
comprehensive income and were not material to our consolidated financial statements for the year ended December 31, 2020.
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.
F-12
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.
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.
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, 2020, 2019 or 2018.
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 2 to 16 years.
F-13
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. Share-based compensation charges are recorded across the consolidated statement of operations
based upon the grantee’s primary function. 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 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 typically 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.
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, commercial matters 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, 2020, 2019 and 2018, we were not subject to any material
litigation or claims and assessments.
Sales of medical devices outside the U.S. 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 U.S. FDA.
In the European Union we are required to obtain CE marks for our products, which denote conformity to essential requirements
for manufacturers of higher-risk devices. We have CE marks to sell many of our products, though currently there is a lapse in
our CE marks for some of our products. Failure to obtain, retain or maintain these CE marks would impact our ability to sell
our products in certain European 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.
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.
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.
F-14
Our policy is to classify interest and penalties related to unrecognized tax benefits as income tax expense.
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, 2020, 2019 or 2018.
Accumulated other comprehensive loss consisted primarily of foreign currency translation adjustment losses of $1.6
million and $4.0 million as of December 31, 2020 and 2019, 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.
The computation of basic and diluted net income per share is as follows:
2020
Year ended December 31,
2019
(in thousands, except per share data)
2018
Basic:
Net income available for common stockholders ...................... $
Weighted average shares outstanding ......................................
21,220 $
20,246
17,934 $
19,813
22,943
19,426
Basic earnings per share .............................................................. $
1.05 $
0.91 $
1.18
Diluted:
Net income available for common stockholders ...................... $
Weighted-average shares outstanding .....................................
Common stock equivalents, if dilutive ....................................
Shares used in computing diluted earnings per common
share .....................................................................................
21,220 $
20,246
233
17,934 $
19,813
513
22,943
19,426
816
20,479
20,326
20,242
Diluted earnings per share ........................................................... $
1.04 $
0.88 $
1.13
Shares excluded in computing diluted earnings per share as
those shares would be anti-dilutive ..........................................
483
468
230
Recent Accounting Pronouncements
In June 2016, the FASB issued ASU 2016-13 Financial Instruments – Credit Losses (Topic 326), which requires a
financial asset (or group of financial assets) measured at amortized cost to be presented at the net amount expected to be
collected. The allowance for credit losses is a valuation account that is deducted from the amortized cost basis of the financial
asset(s) to present the net carrying value at the amount expected to be collected on the financial asset. The measurement of
F-15
expected credit losses is based on relevant information about past events, including historical experience, current conditions
and reasonable, supportable forecasts that affect the collectability of the reported amount, and requires judgment in determining
relevant information and estimation methods. The new standard was effective for us beginning January 1, 2020. The adoption
of this standard did not have a material impact on our financial statements, as the only financial assets we have that are affected
by the standard are trade receivables for which we have historically employed a collectability estimation technique.
In August 2018, the FASB issued ASU 2018-13 Fair Value Measurement (Topic 820), which modifies the disclosure
requirements for fair value measurements. The new standard was effective for us beginning January 1, 2020, with early
adoption permitted. The adoption of this standard did not have a material impact on our financial statements.
In January 2017, the FASB issued ASU 2017-04 Intangibles – Goodwill and Other (Topic 350), which, among other
provisions, eliminates “step 2” from the goodwill impairment test. The annual, or interim, goodwill impairment test will be
performed by comparing the fair value of a reporting unit with its carrying amount. An impairment charge should be
recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized
should not exceed the total amount of goodwill allocated to that reporting unit. The new standard was effective for us
beginning January 1, 2020, with early adoption permitted. The adoption of this standard did not have a material impact on our
financial statements.
In December 2019, the FASB issued ASU 2019-12 Income Taxes (Topic 740), which simplifies the accounting for
income taxes by removing certain exceptions to the general principles in Topic 740 as well as clarifying and amending other
areas of existing GAAP under Topic 740. The new standard is effective for us beginning January 1, 2021, with early adoption
permitted. The adoption of this standard is not expected to have a material impact on our financial statements.
2. Acquisitions and Divestitures
Acquisitions are accounted for using the acquisition method and the acquired businesses’ 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.
The fair market valuations associated with these transactions fall within Level 3 (see Note 13) 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.
Artegraft Biologic Grafts
On June 22, 2020, we entered into an Asset Purchase Agreement (Artegraft APA) to acquire the biologic graft business
from Artegraft, Inc., who subsequent to the closing changed their name to Accidentals, Inc, (Artegraft, Inc.). Under the terms
of the Artegraft APA, we agreed to pay Artegraft, Inc. a total of up to $90.0 million for the purchase of substantially all of its
assets related to its business of the manufacturing, marketing, sale and distribution of its bovine carotid artery grafts (Products)
other than specifically identified excluded assets. The acquired assets included inventory, accounts receivable, machinery and
equipment, intellectual property, permits and approvals, data and records, and customer and supplier information. At closing,
$72.5 million of the purchase price was paid to Artegraft, Inc. and other parties as specified in the Artegraft APA, including
$7.5 million into an escrow account. The escrow amount is to be held until December 31, 2021 to cover any potential claims
against LeMaitre or Artegraft, Inc., after which it will be released to Artegraft, Inc. by mutual consent of the parties.
F-16
Three earn-out payments of $5,833,333 each are potentially due to Artegraft, Inc. under the Artegraft APA depending on
the achievement of specified revenue targets, as follows:
● $5.8 million upon final determination that 20,000 units of Product have been sold to third parties from January
1, 2021 to December 31, 2021;
● $5.8 million upon final determination that 24,000 units of Product have been sold to third parties from
January 1, 2022 to December 31, 2022; and
● $5.8 million upon final determination that 28,800 units of Product have been sold to third parties from
January 1, 2023 to December 31, 2023.
The Artegraft APA includes a catch-up feature on the earn-outs such that, at the end of the three-year period, if the sum
of the unit sales for all three years is greater than or equal to 58,240 unit sales (80% of the combined individual-year targets),
Artegraft, Inc. will receive a “catch-up payment” in an amount equal to (a) $17,500,000 times a fraction, the numerator of
which is the aggregate number of unit sales for the three-year period, and the denominator of which is 72,800 less (b) any
individual-year earn-out previously paid. We recorded this liability at a fair value of $0.4 million to reflect management’s
estimate of the likelihood of achieving these targets at the time of the closing of the acquisition, as well as the time value of
money until payment. This amount will be remeasured each quarter during the earn-out period, with any adjustments recorded
in income from operations.
On the date of acquisition, the Company allocated the consideration given to the individual assets acquired and the
liabilities assumed based on a preliminary estimate of their fair values. During the three months ended September 30, 2020,
the Company obtained and considered additional information related to the assets acquired and liabilities assumed, and
recorded measurement period adjustments to the allocation of the purchase price. The following table summarizes the purchase
price allocation:
Inventory ................................................................................................... $
Accounts receivable ..................................................................................
Equipment and supplies.............................................................................
Accounts payable and other ......................................................................
Intangible assets ........................................................................................
Goodwill ....................................................................................................
Purchase price .......................................................................... $
Allocated
Fair Value
(in thousands)
3,859
1,789
1,140
(53)
39,056
27,115
72,906
The goodwill results from expected synergies of combining the acquired products and customer information to our
existing operations, and is deductible for tax purposes over 15 years.
The following table reflects the allocation of purchase consideration to the acquired intangible assets and related
estimated useful lives:
Allocated
Fair Value
(in thousands)
Estimated
Useful Life (Years)
Customer relationships ................................................... $
Intellectual property .......................................................
Non-compete agreement .................................................
Tradenames ....................................................................
20,310
16,449
104
2,193
15.0
10.0
5.0
10.0
Total intangible assets ................................................. $
39,056
The weighted-average amortization period of the acquired intangible assets was 12.6 years.
F-17
The results of operations of the Artegraft biologic graft business have been included in the results of operations of
LeMaitre since the date of acquisition of June 22, 2020. Revenues since the acquisition date through December 31, 2020 were
$11.1 million. The following unaudited pro forma financial information presents the results of operations for the years ended
December 31, 2020 and 2019 as if the acquisition had occurred at the beginning of 2019. The pro forma financial information
presents historical operating results for the combined entities with adjustments for amortization expense, interest, management
fees and related tax effects. This information has been prepared for comparative purposes only and is not indicative of what
actual results would have been if the acquisitions had taken place at the beginning of fiscal 2019, or of future results.
Unaudited Pro Forma
Financial Information
Year ended
December 31,
2020
2019
($ in thousands)
Net sales ..................................................................................... $
137,450 $
131,915
Net income .................................................................................
20,041
15,045
Net income per share
Basic .................................................................................... $
Diluted ................................................................................. $
0.99 $
0.98 $
0.76
0.74
CardioCel and VascuCel Biologic Patches
On October 11, 2019 (the Closing Date), we entered into an Asset Purchase Agreement (APA) to acquire the biologic
patch business assets and a related technology license from Anteris Technologies Ltd. and various of its subsidiaries (Anteris).
The biologic patch business consists of the CardioCel and VascuCel product lines, which are manufactured in a manner
intended to reduce the risk of calcification. The products are sold worldwide. On the same date, the parties entered into a
Transition Services Agreement (TSA) under which Anteris will manufacture and supply LeMaitre with inventory for a period
of up to three years, unless extended in writing by both parties. Revenues from the acquisition date through December 31, 2019
were $1.4 million.
Under the APA we agreed to pay Anteris a total of up to $15.3 million for the purchase of substantially all of its biologic
patch business assets, other than specifically identified Excluded Assets, plus $8.0 million for the technology licenses. The
acquired assets (in combination with the license) included inventory, intellectual property, permits and approvals, data and
records, and customer and supplier information, as well as a small amount of machinery and equipment. At closing, $14.2
million of the purchase price was paid to Anteris. Shortly thereafter another $0.3 million was paid in connection with delivery
of audited financial statements of the acquired business to LeMaitre. Additional payments of $0.7 million are due within 15
days of the first and third anniversaries of the closing date; the first such payment was made in October 2020. Additional
contingent consideration was or may be payable as follows:
● $2.0 million (the Third Holdback) within 15 days following LeMaitre’s receipt of a CE mark on all acquired
products;
● $2.5 million if revenues in the first 12-month period following the Closing Date exceed $20 million, OR, $1.2
million if revenues in the first 12-month period following the Closing Date exceed $15 million (this milestone
was not met and accordingly no payment was made);
● $2.5 million if revenues in the second 12-month period following the Closing Date exceed $30 million, OR,
$1.2 million if revenues in the second 12-month period following the Closing Date exceed $22.5 million; and
● $0.5 million if by the first anniversary of the Closing Date Anteris extends the shelf life of the products from 36
months to at least 60 months (this milestone was not met and accordingly no payment was made).
This contingent consideration of $7.5 million was initially valued in total at $2.3 million and is being re-measured each
reporting period until the payment requirement ends, with any adjustments reported in income from operations.
F-18
During the quarter ended September 30, 2020, we recorded a $1.3 million adjustment to goodwill with an offsetting
adjustment to deferred income taxes to reflect the difference between book basis and tax basis of the technology license. The
following table summarizes the purchase price allocation:
Inventory and other .............................................................................................. $
Intangible assets ...................................................................................................
Goodwill ..............................................................................................................
Allocated
Fair Value
(in thousands)
1,343
8,725
7,344
Purchase price .................................................................................... $
17,412
The goodwill results from expected synergies of combining the acquired products and customer information to our
existing operations, and is deductible for tax purposes over 15 years.
The following table reflects the allocation of purchase consideration to the acquired intangible assets and related
estimated useful lives:
Customer relationships ....................................................... $
Intellectual property ...........................................................
Non-compete agreement .....................................................
Tradenames ........................................................................
Weighted
Average
Allocated
Fair Value Useful Life (Years)
(in thousands)
5,562
2,335
361
467
12.0
8.0
5.0
8.0
Total intangible assets ..................................................... $
8,725
The weighted-average amortization period of the acquired intangible assets was 10.4 years.
Tru-Incise Valve Cutter
On July 12, 2019, we entered into an agreement with UreSil, LLC, an Illinois limited liability company, to purchase the
remaining assets of their Tru-Incise valve cutter business, including distribution rights in the United States. We also entered
into a transition services agreement under which UreSil, LLC would continue to manufacture the acquired products for us for a
specified time, until we had transferred the manufacturing process to our Burlington, Massachusetts facilities. Revenues from
the acquisition date through December 31, 2019 were $0.8 million.
The purchase price for the acquired assets, which included inventory, machinery and equipment, intellectual property,
and customer and supplier information, was $8.0 million. Of this amount, $6.8 million was paid at closing, with three follow-
on payments $0.4 million each due on the first, second and third anniversaries of the closing date. The deferred amounts
totaling $1.2 million were recorded at an acquisition-date fair value of $1.1 million using a discount rate of 4.19% to reflect the
time value of money between the acquisition date and the payment due dates. There are no contingencies associated with these
holdback payments, although they may be reduced for certain post-closing claims. The first payment was made without
adjustment in July 2020.
F-19
The following table summarizes the preliminary purchase price allocation:
Inventory ..................................................................................................... $
Equipmentand supplies ...............................................................................
Intangible assets ..........................................................................................
Goodwill .....................................................................................................
Purchase price ........................................................................... $
Allocated
Fair Value
(in thousands)
276
70
4,844
2,748
7,938
The goodwill results from expected synergies of combining the acquired products and customer information to our
existing operations, and is deductible for tax purposes over 15 years.
The following table reflects the allocation of purchase consideration to the acquired intangible assets and related
estimated useful lives:
Customer relationships ..................................................... $
Intellectual property .........................................................
Non-compete agreement ...................................................
Tradenames ......................................................................
Weighted
Average
Allocated
Fair Value Useful Life (Years)
(in thousands)
3,945
563
233
103
13.0
7.0
5.0
7.0
Total intangible assets ................................................... $
4,844
The weighted-average amortization period of the acquired intangible assets was 11.8 years.
Cardial
On October 22, 2018, we acquired the business assets of Cardial, located in Saint-Etienne, France. The Cardial business
consists of the manufacturing of polyester vascular grafts, valvulotomes, surgical glue and original equipment manufacturing
(OEM) services.
The purchase price for the acquired assets, including the land and building, inventory, machinery and equipment,
intellectual property, permits and approvals, data and records, and customer and supplier information, was €2.0 million ($2.3
million). At closing, €1.1 million ($1.3 million) was paid in cash, and €0.5 million ($0.5 million) of liabilities were assumed by
LeMaitre Cardial SAS. Another €0.4 million ($0.4 million) was due in two installments, half to be paid twelve months after the
closing date, and half eighteen months after the closing date, subject to possible reductions depending upon the results of a
reconciliation of the value of inventory transferred, as outlined in the agreement, or for certain post-closing claims. The first of
these two payments was not required to be made based on the inventory reconciliation results. The second payment was made
in April 2020, in a reduced amount based on the inventory reconciliation results, as well as other post-closing claims.
F-20
The following table summarizes the purchase price allocation:
Allocated
Fair Value
(in thousands)
Inventory ................................................................................................... €
Land and building .....................................................................................
Equipment and supplies ............................................................................
Intangible assets ........................................................................................
Bargain purchase gain ...............................................................................
Purchase price ........................................................................................... €
2,419
750
94
623
(1,946 )
1,940
The bargain purchase gain was recorded to reflect the excess of the net assets acquired over the purchase price. We
recorded deferred taxes on this gain of €0.5 million ($0.6 million), resulting in a net gain of €1.4 million ($1.6 million).
The following table reflects the allocation of purchase consideration to the acquired intangible assets and related
estimated useful lives:
Customer relationships ..................................................... €
Intellectual property .........................................................
Non-compete agreement ...................................................
Tradenames ......................................................................
Weighted
Average
Useful Life (Years)
Allocated
Fair Value
(in thousands)
250
237
46
90
16.0
5.0
5.0
5.0
Total intangible assets ................................................... €
623
The weighted-average amortization period of the acquired intangible assets was 9.4 years.
Applied Medical
On September 20, 2018, we entered into an agreement to acquire the assets of the embolectomy catheter business of
Applied Medical Resources Corporation (Applied). The embolectomy catheter business consists of several embolectomy and
thrombectomy catheter product lines which are sold worldwide. On the same date, we entered into a transition services
agreement under which Applied would supply us with inventory for a period of twelve months, unless extended in writing by
both parties. The TSA was not extended.
The purchase price for the acquired assets, which included inventory, machinery and equipment, intellectual property,
permits and approvals, data and records, and customer and supplier information, was $14.2 million. Of this amount, $11.0
million was paid at closing, another $2.0 million was paid 12 months following the closing date and the final $1.2 million was
paid 24 months following the closing date, in a slightly reduced amount. The deferred amounts totaling $3.2 million were
recorded at an acquisition-date fair value of $3.0 million using a discount rate of 3.75% to reflect the time value of money
between the acquisition date and the payment due dates.
F-21
The following table summarizes the purchase price allocation. The purchase accounting is complete:
Allocated
Fair Value
(in thousands)
Inventory ................................................................................................... $
Equipment and supplies.............................................................................
Intangible assets ........................................................................................
Goodwill ....................................................................................................
739
416
6,527
6,361
Purchase price .......................................................................... $
14,043
The goodwill results from expected synergies of combining the acquired products and customer information to our
existing operations, and is deductible for tax purposes over 15 years.
The following table reflects the allocation of purchase consideration to the acquired intangible assets and related
estimated useful lives:
Customer relationships ..................................................... $
Intellectual property .........................................................
Non-compete agreement ...................................................
Tradenames ......................................................................
Weighted
Average
Allocated
Fair Value Useful Life (Years)
(in thousands)
4,475
1,316
530
206
16.0
7.0
5.0
7.0
Total intangible assets ................................................... $
6,527
The weighted-average amortization period of the acquired intangible assets was 13.0 years.
Reddick Divestiture
On April 5, 2018, we entered into an asset purchase agreement with Specialty Surgical Instrumentation, Inc. to sell the
inventory, intellectual property and other assets associated exclusively with our Reddick cholangiogram catheter and Reddick-
Saye screw product lines for $7.4 million. Concurrent with this divestiture we entered into a transition services agreement
(TSA) under which we will continue to manufacture and supply these products to the buyer for a period of up to two years
unless extended by both parties, as well as a balloon supply agreement under which we will supply balloons, a component of
the cholangiogram catheters, to the buyer for a period of up to six years unless extended by both parties. We recorded a gain in
connection with these agreements of $5.9 million. The following table summarizes the allocation of consideration received:
Inventory ................................................................................................... $
Deferred revenue - transition services agreement .....................................
Goodwill ....................................................................................................
Gain on divestiture ....................................................................................
Consideration received ......................................................... $
Allocated
Fair Value
(in thousands)
308
1,081
135
5,876
7,400
Under the terms of the TSA, we agreed to manufacture the Reddick products for the buyer at prices at or in some cases
below our cost. We allocated a portion of the consideration received to this agreement to reflect it at fair value and recorded it
as deferred revenue. As the products were sold to the buyer, we amortized a portion of the deferred revenue to adjust the gross
margin on the sale to fair value on a specific identification basis. Additionally, as the Reddick product lines that were divested
constituted a business, we allocated a portion of our goodwill to this divestiture based on the fair value of the business sold in
relation to the fair value of the business retained.
F-22
3. Inventory and Other Deferred Costs
Inventory and other deferred costs consists of the following:
December 31,
2020
December 31,
2019
Raw materials ..................................................................................... $
Work-in-process .................................................................................
Finished products ................................................................................
Other deferred costs ............................................................................
(in thousands)
5,044 $
6,004
28,117
5,950
5,359
6,238
23,032
4,898
Total inventory and other deferred costs ............................................ $
45,115 $
39,527
We had inventory on consignment at customer sites of $2.1 million and $1.9 million as of December 31, 2020 and 2019,
respectively.
In connection with our 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. These
costs include fixed and variable overhead costs associated with the cryopreservation process, including primarily direct labor
costs, tissue recovery fees, inbound freight charges, indirect materials and facilities costs. General and administrative expenses
and selling expenses associated with the provision of these services are expensed as incurred.
4. Property and Equipment
Property and equipment consists of the following:
Computers and equipment .................................................................. $
Machinery and equipment ..................................................................
Building and leasehold improvements ................................................
As of December 31,
2019
2020
(in thousands)
5,046 $
17,266
12,809
4,623
16,245
11,758
Gross property and equipment ............................................................
Less accumulated depreciation ...........................................................
35,121
(20,085)
32,626
(17,772)
Property and equipment, net ............................................................... $
15,036 $
14,854
During the years ended December 31, 2020, 2019 and 2018 we wrote off fully depreciated assets with gross values of
$0.6 million, $0.5 million and $1.0 million, respectively.
Depreciation expense is as follows:
2020
Year ended December 31,
2019
(in thousands)
2018
Depreciation expense ....................................... $
3,181 $
2,979 $
2,564
F-23
5. Goodwill and Other Intangibles
Goodwill consists of the following:
As of December 31,
2020
2019
Balance at beginning of year .............................................. $
Additions for acquisitions ...................................................
Purchase accounting adjustments .......................................
Effects of currency exchange .............................................
39,951 $
27,115
(1,345)
224
29,868
10,092
-
(9)
Balance at end of year ........................................................ $
65,945 $
39,951
During the quarter ended September 30, 2020, we recorded a $1.3 million adjustment to goodwill with an offsetting
adjustment to deferred income taxes to reflect the difference between book basis and tax basis of the technology license
acquired under the CardioCel APA.
Other intangibles consist of the following:
December 31, 2020
December 31, 2019
Gross
Carrying Accumulated Carrying Carrying Accumulated Carrying
Value
Amortization Value
Amortization Value
Gross
Value
Net
Net
Product technology and
intellectual property ................. $
29,951 $
7,947 $
22,004 $
13,502 $
5,722 $
7,780
(in thousands)
Trademarks, tradenames and
licenses ....................................
Customer relationships ................
Other intangible assets ................
Total identifiable intangible
assets ....................................... $
4,000
38,525
1,767
1,094
5,424
873
2,906
33,101
894
1,807
18,215
1,725
702
3,364
568
1,105
14,851
1,157
74,243 $
15,338 $
58,905 $
35,249 $
10,356 $
24,893
These assets are being amortized over useful lives ranging from 2 to 16 years. The weighted-average amortization period
for these intangibles as of December 31, 2020, is 11.7 years. Amortization expense is included in general and administrative
expense and is as follows:
2020
Year ended December 31,
2019
(in thousands)
2018
Amortization expense ...................................... $
5,043 $
2,437 $
1,760
During the year ended December 31, 2019 we wrote off fully amortized intangible assets with a gross values of $4.5
million. Estimated amortization expense for each of the next five fiscal years, based upon the intangible assets at December 31,
2020, is as follows:
2021
2022
Year ended December 31,
2023
(in thousands)
2024
2025
Amortization expense .................................. $
6,179 $
5,975 $
5,902 $
5,706 $
5,467
F-24
6. Revolving Line of Credit and Long-term Debt
In connection with the acquisition of the Artegraft biologic graft business, we incurred debt in the amount of $65 million
under a senior secured credit facility with a group of banks. This credit arrangement included a $25 million revolving credit
line, which was fully drawn at inception, as well as a $40 million five-year term loan. During the year ended December 31,
2020 we made scheduled principal payments on the term loan of $1.0 million, and repaid the revolving line of credit in full.
Long term debt as of December 31, 2020 is as follows:
December 31,
2020
(in thousands)
Five-year term loan, net of unamortized debt issuance costs of $968 ........................... $
Less current portion .......................................................................................................
$
38,032
(2,500)
35,532
The following table summarizes the maturities or our long-term debt under the term loan agreement:
Year ending December 31,
2021 ................................................................................................................. $
2022 .................................................................................................................
2023 .................................................................................................................
2024 .................................................................................................................
2025 .................................................................................................................
Total before unamortized issuance costs .......................................................................
Less unamortized issuance costs ................................................................................
Less current portion of long-term bebt .......................................................................
Total long-term debt ...................................................................................................... $
2,500
3,000
3,500
4,000
26,000
39,000
(968)
(2,500)
35,532
The loans bear interest at a rate per annum of, at our option, either (i) the Base Rate plus an applicable margin of from
1.25% to 1.75% depending on our consolidated leverage ratio, or (ii) the Eurodollar Rate plus an applicable margin of from
2.25% to 2.75% depending on our consolidated leverage ratio. Base Rate is defined in the credit agreement as a fluctuating rate
per annum of the Federal Funds rate plus 0.5%, or the prime rate of interest established from time to time by KeyBank National
Association. At December 31, 2020 all outstanding borrowings were designated as Eurodollar loans and bore interest of 3.5%.
We incurred debt issuance costs in connection with this credit arrangement of approximately $1.8 million. The transaction
costs were allocated between the revolving line of credit and the term loan, with the portion related to the revolving line of
credit of $0.7 million recorded in other assets on our balance sheet, and the portion allocated to the term loan recorded as a
deduction from the amount of the debt. All of these transaction costs are being amortized into interest expense on a straight-
line basis as the result is not materially different from using the interest method, over the five-year term. This results in an
effective interest rate of approximately 4.2%. Cash paid for interest during the year ended December 31, 2020 was $0.9
million.
The term of the revolving line of credit is five years, and allows re-borrowing up to $25 million during the term, with all
outstanding amounts due on June 22, 2025. The term loan is repayable in increasing quarterly installments of $0.5 million to
$1.0 million commencing September 30, 2020 through March 31, 2025, with the remaining outstanding balance due on June
22, 2025.
We must comply with various financial and non-financial covenants, which are set forth in the Credit Agreement. The
primary financial covenant consists of a maximum consolidated leverage ratio. The lenders are entitled to accelerate repayment
of the loans and terminate the revolving credit commitment upon the occurrence of any of various events of default as
described in the Credit Agreement. We were in compliance with the covenants as of December 31, 2020.
Borrowings under the secured credit facility are secured by 100% of the stock of our domestic subsidiaries, portions of
the stock of certain of our foreign subsidiaries, and substantially all of our and our subsidiaries’ other property and assets, in
each case subject to various exceptions.
We are required to make mandatory prepayments of the term loans and any revolving credit loans in various amounts if
we have Excess Cash Flow (as defined in the Credit Agreement, and commencing in respect of our fiscal year ending
F-25
December 31, 2021), if we make certain sales of assets outside the ordinary course of business above certain thresholds or if
we suffer certain property loss events above certain thresholds. We may make optional prepayments of the term loans without
premium or penalty.
7. Accrued Expenses and Other Long-term Liabilities
Accrued expenses consist of the following:
December 31,
2020
December 31,
2019
Compensation and related taxes ............................................................. $
Income and other taxes ...........................................................................
Professional fees .....................................................................................
Other .......................................................................................................
(in thousands)
8,675 $
2,394
39
6,417
8,550
1,003
40
4,421
Total .................................................................................................... $
17,525 $
14,014
Other long-term liabilities consist of the following:
Acquisition-related liabilities ................................................................. $
Income taxes ...........................................................................................
Other .......................................................................................................
(in thousands)
3,700 $
813
130
3,268
781
166
Total .................................................................................................... $
4,643 $
4,215
December 31,
2020
December 31,
2019
8. Commitments and Contingencies
Leases
We conduct the majority of our operations in leased facilities, all of which are accounted for as operating leases, as they
do not meet the criteria for finance leases. Our principal worldwide executive, distribution, and manufacturing operations are
located in five leased facilities with square footage totaling 109,354 in Burlington, Massachusetts. All five Burlington leases
expire in December 2030. In addition, our European operations are headquartered at a 16,470 square foot leased facility located
in Sulzbach, Germany under a lease which expires in August 2023. This lease contains two five-year renewal options. We also
lease a 2,258 square foot facility in Hereford, England which houses our United Kingdom sales and distribution business. In
connection with our acquisition of the Artegraft biologic graft business, we assumed a 16,732 square foot lease in North
Brunswick, New Jersey, which expires in October 2029. We also have smaller long-term leased sales, marketing and other
facilities located in Arizona, Japan, Canada, Australia, Singapore and China, and short-term leases in Italy, Spain and Illinois.
Our lease in Canada contains a five-year renewal option exercisable in February 2023. Our leases in Germany and Australia are
subject to periodic rent increases based on increases in the consumer price index as measured each September and May,
respectively, with such increases applicable to the subsequent twelve months of lease payments. None of our noncancelable
lease payments include non-lease components such as maintenance contracts; we generally reimburse the landlord for direct
operating costs associated with the leased space. None of our leases have variable payments. We have no subleases, and there
are no residual value guarantees associated with, or restrictive covenants imposed by, any of our leases. There were no assets
held under capital leases at December 31, 2020.
We also lease automobiles under operating leases in the U.S. as well as certain other countries. The terms of these leases
are generally three years, with older vehicles replaced by newer vehicles from time to time.
As discussed above under Recent Accounting Pronouncements, on January 1, 2019 we adopted the provisions of ASU
No. 2016-02, Leases (Topic 842), subsequently amended by ASU 2018-11, Leases (Topic 842): Targeted Improvements.
Under the new guidance, we are required to recognize the following for all leases (with the exception of short-term leases) at
F-26
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.
Our most significant judgment involved in determining the amounts to initially record as lease liabilities and right-of-use
assets was the selection of a discount rate; because we had no debt at that time we had no incremental borrowing rate to
reference. We therefore estimated an incremental borrowing rate using quotes from potential lenders as the primary inputs,
augmented by other available information. The resulting rate selected was 5.25%. We determined that it was appropriate to
apply this single rate to our portfolio of leases worldwide, as the lease terms and conditions were substantially similar, and
because we believe our subsidiaries would be unable to obtain borrowings on their own without a commitment of parent
company support. During 2020 we assumed a building lease in connection with our acquisition of Artegraft biologic graft
business, for which we referenced the associated debt agreement entered into for that transaction, in establishing a discount
rate.
Additional information with respect to our leases is as follows:
Year ended
December 31, December 31,
Year ended
2020
(in thousands)
2019
(in thousands)
Lease cost
Operating lease cost ..................................................................................................... $
Short-term lease cost ...................................................................................................
Total lease cost ............................................................................................................ $
1,912 $
192
2,104 $
1,756
291
2,047
Other information
Cash paid for amounts included in the measurement of operating lease liabilities ..... $
2,404 $
1,858
Right-of-use assets obtained in exchange for new operating lease liabilities .............. $
2,770 $
10,571
Weighted average remaining lease term - operating leases (years) .............................
Weighted average discount rate - operating leases ......................................................
7.8
5.02%
8.3
5.25%
At December 31, 2020, the minimum noncancelable operating lease rental commitments with initial or remaining terms
of more than one year are as follows:
Year ending December 31,
2021 ............................................................................................................... $
2022 ...............................................................................................................
2023 ...............................................................................................................
2024 ...............................................................................................................
2025 ...............................................................................................................
Thereafter .................................................................................................................
Adjustment to net present value as of December 31, 2020 ..........................................
2,763
2,447
2,064
1,866
1,916
9,920
(4,230)
Minimum noncancelable lease liability ....................................................................... $
16,746
Purchase Commitments
As part of our normal course of business, we have commitments to purchase $5.2 million of inventory through 2021.
These purchases are to be used in the normal course of business and do not represent excess commitments or loss contracts.
F-27
9. Income Taxes
Income (loss) before income taxes is as follows:
2020
Year ended December 31,
2019
(in thousands)
2018
United States ........................................................... $
Foreign ....................................................................
25,308 $
2,048
17,989 $
3,690
22,256
6,188
Total ........................................................................ $
27,356 $
21,679 $
28,444
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 ....................................................................
2020
Year ended December 31,
2019
(in thousands)
2018
4,594 $
806
1,064
1,501 $
304
1,116
4,262
673
2,718
6,464
2,921
7,653
(397)
(48)
117
(328)
538
144
142
(1,512)
(145)
(495)
824
(2,152)
Provision for income taxes ..................................... $
6,136 $
3,745 $
5,501
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, 2020, the gross amount of unrecognized tax benefits exclusive of
interest and penalties was $0.8 million, which may increase within the twelve months ending December 31, 2021. We
recognized a reduction of unrecognized tax benefits in 2020 due to the settlement of a 2013-2016 Corporate Tax audit by the
German Tax Authority. We remain subject to examination until the statute of limitations expires for each remaining respective
tax jurisdiction. The statute of limitations will be open with respect to these tax positions through 2028. A reconciliation of the
beginning and ending amount of our unrecognized tax benefits is as follows:
Unrecognized tax benefits at the beginning of year ........................ $
Additions for tax positions of current year ......................................
Additions for tax positions of prior years ........................................
Reductions for settlements with taxing authorities. ........................
Reductions for lapses of the applicable statutes of limitations ........
Unrecognized tax benefits at the end of the year............................. $
2020
2019
(in thousands)
2018
848 $
-
37
(65)
-
820 $
711 $
74
63
-
-
848 $
525
73
113
-
-
711
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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 .................................................................
Operating lease liabilities ...........................................................
Intangible assets .........................................................................
Stock options ..............................................................................
Other ...........................................................................................
As of December 31,
2019
2020
(in thousands)
1,629 $
1,348
1,019
521
994
3,664
4,386
359
105
840
1,289
944
277
787
3,343
2,764
342
20
Total deferred tax assets .............................................................
14,025
10,606
Deferred tax liabilities:
Property and equipment..............................................................
Goodwill .....................................................................................
Operating lease right-of-use assets .............................................
Foreign branch deferred offset ...................................................
Other ...........................................................................................
(1,831)
(4,055)
(3,503)
(954)
(299)
(1,520)
(3,459)
(3,224)
(923)
(187)
Total deferred tax liabilities .......................................................
(10,642)
(9,313)
Net deferred tax assets before valuation allowance ....................
3,383
1,293
Valuation allowance ...................................................................
(1,824)
(1,388)
Net deferred tax liabiltity .................................................... $
1,559 $
(95)
Deferred tax classification
Long-term deferred tax asset ............................................... $
Long-term deferred tax liability ..........................................
1,686 $
(127)
1,084
(1,179)
Net long-term deferred tax liability ..................................... $
1,559 $
(95)
In 2019, we increased our valuation allowance by $0.1 million mainly attributable to Australian net operating loss carry
forwards and Massachusetts credit carryforwards. In 2020, we increased our valuation allowance by $0.4 million mainly
attributable to Australian net operating loss carry forwards and Massachusetts credit carryforwards.
As of December 31, 2020, we have provided a valuation allowance of $1.8 million for deferred tax assets primarily
related to Australian net operating loss and capital loss carry forwards and Massachusetts tax credit carry forwards that are not
expected to 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.
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, 2020, we have net operating loss carryforwards in Australia of $1.5 million that do not expire, in
France of $2.5 million that do not expire, in Spain of $0.9 million that do not expire, and in Norway of $0.1 million that do not
expire. We have a capital loss carryforward in Australia of $1.7 million that does not expire. We also have state tax credit
F-29
carryforwards of approximately $1.6 million that are available to reduce future tax liabilities, which begin to expire in 2021, or
can be carried forward indefinitely.
In December 2018, we reevaluated our international operations and as a result, are no longer indefinitely reinvested with
respect to undistributed earnings from our German and Australian subsidiaries. There was no material deferred tax expense
recorded for foreign and state tax costs associated with the future remittance of these undistributed earnings. We remain
permanently reinvested with respect to undistributed earnings from our other foreign subsidiaries. It is not practicable to
estimate the amount of deferred tax liability, if any, with respect to these permanently reinvested undistributed earnings.
A reconciliation of the U.S. federal statutory rate to our effective tax rate is as follows:
2020
2019
2018
Federal statutory rate ....................................
State tax, net of federal benefit .....................
Effect of foreign taxes ..................................
Federal tax on foreign income ......................
Valuation allowance .....................................
Foreign deferred tax liability offset ..............
Manufacturing deduction .............................
Research & development tax credits ............
Stock options ................................................
Uncertain tax positions .................................
Other permanent differences ........................
Change in tax laws .......................................
Deferred tax remeasurement ........................
Other .............................................................
21.0%
2.2%
1.1%
0.4%
1.4%
(0.2%)
0.0%
(0.6%)
(2.3%)
0.3%
(0.6%)
0.0%
0.0%
(0.3%)
21.0%
1.9%
2.1%
0.8%
0.6%
(0.4%)
0.0%
(1.2%)
(8.8%)
1.0%
0.5%
0.0%
0.0%
(0.2%)
21.0 %
1.4 %
3.8 %
1.4 %
(3.2 %)
(0.3 %)
0.0 %
(0.7 %)
(3.3 %)
0.8 %
(0.7 %)
0.0 %
0.0 %
(0.9 %)
Effective tax rate ..........................................
22.4%
17.3%
19.3 %
In August 2018, the German tax authority commenced an audit of our German subsidiary for the tax years 2013 through
2016. This audit concluded in 2020 and our German subsidiary settled for an immaterial amount of additional German tax. We
are not currently under audit in any other tax jurisdictions.
As of December 31, 2020, a summary of the tax years that remain subject to examination in our most significant tax
jurisdictions are:
United States ..................................................................................
Foreign ...........................................................................................
2017 and forward
2013 and forward
Supplemental disclosures of cash flow information are as follows:
Cash paid for income taxes, net ....................... $
4,470 $
4,817 $
5,521
2020
Year ended December 31,
2019
(in thousands)
2018
10. Stockholders’ Equity
Authorized Shares
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 and up to 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,
F-30
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.
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. The 2006 Plan allows for the granting of an aggregate 5,500,000 shares 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 860,847 remain available for grant as of December 31, 2020.
We have computed the fair value of employee stock options granted each year using the following weighted average
assumptions:
Dividend yield ...............................................................................
Volatility .......................................................................................
Risk-free interest rate ....................................................................
Weighted average expected option term (in years) .......................
Weighted average fair value per share of options granted ............ $
1.02%
47.3%
0.3%
4.9
13.24 $
0.96%
42.8%
1.7%
4.7
12.51 $
1.20%
41.3%
2.7%
4.8
8.28
2020
2019
2018
A summary of option activity as of December 31, 2020 and the year then ended is presented below:
Balance outstanding at December 31, 2019 (1) ...............
1,047,094 $
23.19
Number
of Shares
Weighted
Average
Exercise Price
Weighted
Average
Remaining
Aggregate
Contractual Intrinsic
Term
(in years)
4.31
Value
$ 13,366,595
Granted ............................................................................
Exercised (2) ...................................................................
Canceled / Expired ..........................................................
Balance outstanding at December 31, 2020 (3) ...............
222,110 $
(331,958) $
(5,406) $
931,840 $
Vested and exercisable at December 31, 2020 (4) ..........
Expected to vest at December 31, 2020 ..........................
Total ................................................................................
274,411 $
657,429 $
931,840
36.67
17.99
27.49
28.22
23.08
30.37
$ 5,413,197
4.49
$ 11,442,240
3.50
4.93
$ 4,780,656
(1) The aggregate intrinsic value represents the difference between the exercise price and $35.95, the closing price of our
stock on December 31, 2019, for all in-the-money options outstanding.
(2) The aggregate intrinsic value of shares exercised represents the difference between the exercise price and the closing
price of our stock on the date of exercise.
(3) The aggregate intrinsic value represents the difference between the exercise price and $40.50, the closing price of our
stock on December 31, 2020, for all in-the-money options outstanding.
(4) The aggregate intrinsic value represents the difference between the exercise price and $40.50, the closing price of our
stock on December 31, 2020, for all in-the-money options vested and exercisable as of that date.
F-31
Restricted Stock Units
A summary of our RSU activity is as follows:
Weighted
Average
Grant Date
Fair Value
Shares
Balance outstanding at December 31, 2019 ...........................
188,681 $
26.14
Granted ...................................................................................
Vested (1) ...............................................................................
Canceled .................................................................................
46,146 $
(50,669) $
(37,143) $
36.86
22.76
27.88
Balance outstanding at December 31, 2020 ...........................
147,015 $
30.24
(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 2020, 2019 and 2018 were $1.8 million,
$2.1 million, and $1.9 million, respectively.
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 (in thousands) ............................... $
16,537
34.47 $
570 $
20,524
33.28
683
2020
2019
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 ....................................
2020
2019
2018
(in thousands)
1,938 $
1,084
1,580 $
1,062
Total stock-based compensation ............ $
3,022 $
2,642 $
Stock-based compensation is included in our statements of operations as follows:
2020
2019
2018
(in thousands)
Cost of sales .................................................. $
Sales and marketing ......................................
General and administrative ...........................
Research and development ............................
333 $
516
1,883
290
310 $
544
1,509
279
Total stock-based compensation ............ $
3,022 $
2,642 $
1,457
892
2,349
272
529
1,293
255
2,349
We expect to record the unamortized portion of share-based compensation expense of $10.8 million for existing stock
options and RSUs outstanding at December 31, 2020, over a weighted-average period of 3.6 years.
F-32
Stock Repurchase Plans
On February 23, 2021, our Board of Directors authorized the repurchase of up to $15.0 million of the Company’s
common stock through transactions on the open market, in privately negotiated purchases or otherwise until February 22, 2022.
The repurchase program may be suspended or discontinued at any time. To date we have not made any repurchases under this
program.
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 2020
March 3, 2020
May 20, 2020
August 27, 2020
November 19, 2020
March 19, 2020 $
June 4, 2020 $
September 10, 2020 $
December 3, 2020 $
Fiscal Year 2019
March 22, 2019
May 22, 2019
August 21, 2019
November 20, 2019
April 5, 2019 $
June 6, 2019 $
September 5, 2019 $
December 5, 2019 $
0.095 $
0.095 $
0.095 $
0.095 $
0.085 $
0.085 $
0.085 $
0.085 $
1,917
1,917
1,925
1,936
1,672
1,672
1,691
1,701
On February 23, 2021, our Board of Directors approved a quarterly cash dividend on our common stock of $0.11 per
share payable on March 25, 2021, to stockholders of record at the close of business on March 9, 2021, which will total
approximately $2.2 million.
11. 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 also 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 $0.3 million, $0.4 million and $0.3 million for 2020, 2019 and 2018, respectively. A similar plan is offered to
our Canadian employees.
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.
F-33
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, Germany and France. Net sales to
unaffiliated customers by country were as follows:
2020
Year ended December 31,
2019
(in thousands)
2018
United States ...................................................... $
Germany .............................................................
Other countries ...................................................
75,222 $
12,365
41,779
63,130 $
12,400
41,702
59,078
12,445
34,045
Net sales ............................................................. $
129,366 $
117,232 $
105,568
Total long-term assets by country, including property and equipment, net and right-of-use leased assets were as follows:
As of December 31,
2020
2019
(in thousands)
United States ........................................................................ $
Australia ...............................................................................
France ..................................................................................
Germany ..............................................................................
Other countries .....................................................................
27,660 $
115
1,140
1,138
1,049
24,885
1,499
1,089
1,405
1,184
Total long-term assets .......................................................... $
31,102 $
30,062
13. 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.
Level 1 assets being measured at fair value on a recurring basis as of December 31, 2020 included our short-term
investment mutual fund account.
We had no Level 2 assets being measured at fair value on a recurring basis as of December 31, 2020.
As discussed in Notes 1 and 2, several of our acquisition-related assets and liabilities have been measured using Level 3
techniques. During 2020 we recorded a contingent liability associated with our acquisition of the bovine carotid graft business
from Artegraft. As discussed more fully in Note 2, the agreement requires us to make potential additional payments to
Artegraft of up to $17.5 million depending on the achievement of certain revenue milestones during the first three calendar
years following the acquisition. We recorded this liability at a fair value of $0.4 million to reflect management’s estimate of the
likelihood of achieving these targets at the time of the Closing, as well as the time value of money until payment. This amount
will be remeasured each quarter during the earn-out period, with any adjustments recorded in income from operations.
During 2019, we recorded contingent liabilities associated with our acquisition of the CardioCel and VascuCel patch
business from Anteris. The agreement includes the potential for us to pay up to $7.8 million of additional consideration beyond
payments made to date, with $0.3 million contingent upon the delivery of audited financial statement of the acquired business
F-34
to us; $2.0 million contingent on LeMaitre Vascular’s success in obtaining CE marks on the acquired products, $0.5 million
contingent upon Anteris’ success in extending the shelf life of the acquired products, and another $5.0 million contingent on
the achievement of specified levels of revenues in the first 12 and 24 months following the acquisition date. This additional
contingent consideration was initially valued in total at $2.3 million and is being re-measured each reporting period until the
payment requirement ends, with any adjustments reported in income from operations. The contingent payment related to the
delivery of audited financial statements of the business was paid in November 2019 upon satisfaction of the deliverable. The
contingent payments related to Anteris’ extending the shelf life of the acquired products and achieving the required revenues
during the first 12 months following the acquisition were not met, and the portion of the liabilities related to these items was
adjusted through income from operations.
The following table provides a rollforward of the fair value of these liabilities, as determined by Level 3 unobservable
inputs including management’s forecast of future revenues for the acquired businesses, as well as, management’s estimates of
the likelihood of achieving the other specified criteria:
2020
Year ended December 31,
2019
(in thousands)
2018
Beginning balance .................................................... $
Additions ..................................................................
Payments ..................................................................
Change in fair value included in earnings ................
1,764 $
406
-
70
72 $
1,989
(309)
12
1,300
-
(1,199)
(29)
Ending balance ......................................................... $
2,240 $
1,764 $
72
14. Accumulated Other Comprehensive Income (Loss)
Beginning balance ........................................................................... $
2020
Year ended December 31,
2019
2018
(in thousands)
(4,007) $
(3,900) $
(2,289 )
Other comprehensive income (loss) before reclassifications ..........
Amounts reclassified from accumulated other comprehensive
loss ..............................................................................................
2,482
(107)
(1,611 )
-
-
-
Ending Balance ............................................................................... $
(1,525) $
(4,007) $
(3,900 )
Changes to our accumulated other comprehensive loss consisted primarily of foreign currency translation for the years
ended December 31, 2020, 2019 and 2018.
F-35
15. Quarterly Financial Data (unaudited)
2020
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 .....................................................................
Basic .......................................................................................... $
Diluted ....................................................................................... $
30,551 $
20,483
4,353
3,174
24,851 $
17,029
4,872
3,500
0.16 $
0.16 $
0.17 $
0.17 $
36,416 $
22,704
10,018
7,513
0.37 $
0.37 $
37,548
24,402
9,545
7,033
0.35
0.34
2019
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 .....................................................................
Basic .......................................................................................... $
Diluted ....................................................................................... $
28,479 $
19,464
4,435
3,513
29,483 $
20,315
5,915
4,624
0.18 $
0.17 $
0.23 $
0.23 $
29,100 $
20,166
5,905
5,184
0.26 $
0.25 $
30,170
19,908
4,928
4,613
0.23
0.23
F-36
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Board of Directors
Lawrence J. Jasinski 1, 2, 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
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
2019 High Low
First Quarter $31.55
$22.45
Second Quarter $30.79
$25.55
Third Quarter $35.78
$27.91
Fourth Quarter $36.21
$31.27
2020 High Low
First Quarter $38.64
$18.76
Second Quarter $31.78
$21.89
Third Quarter $34.19
$25.39
Fourth Quarter $41.86
$31.21
Joseph P. Pellegrino, Jr.
Chief Financial Officer & Secretary
LeMaitre Vascular, Inc.
Director since 2016
John A. Roush1, 2
Operating Executive Advisor
ACON Investments, LLC
Director since 2014
1 Member of the Audit Committee
2 Member of the Compensation Committee
3 Member of the Nominating and Corporate
Governance Committee
David B. Roberts
President
LeMaitre Vascular, Inc.
Director since 2001
Bridget A. Ross3
Chief Executive Officer
ChroniSense Medical, Ltd.
Director since 2020
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
150 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 Thursday, June 3, 2021, beginning at
10:00 a.m. at our offices at 32 Third 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 us at:
Investor Relations
LeMaitre Vascular, Inc.
63 Second Avenue
Burlington, MA 01803 USA
Executive Committee
George W. LeMaitre
Chairman & Chief Executive Officer
Giovannella Deiure
Vice President, Sales - Southern Europe
Christopher D. Minnett
Country Manager, Canada
David B. Roberts
President
Helen Goulding
Director, Sales - Northern Europe
Daniel J. Mumford
Director, Human Resources
Joseph P. Pellegrino, Jr.
Chief Financial Officer
Andrew Hodgkinson
SVP, Clinical, Regulatory & Quality Affairs
Jonathan W. Ngau
Vice President, Information Technology
Trent G. Kamke
Senior Vice President, Operations
Chance Kriesel
Vice President, Sales, The Americas
Jacob Petersen
Vice President, Asia-Pac
Laurie A. Churchill
Senior Vice President & General Counsel
Roli Kumar-Choudhury
Vice President, Quality Affairs
James Russell
Vice President, Production and Supply Chain
Kimberly L. Cieslak
Vice President, Marketing
Ina Leininger
Director, Sales - Central Europe
Xiang Zhang
Vice President, Regulatory Affairs
Ryan H. Connelly
Vice President, Research & Development
StÉphane Maier
Senior Vice President, EMEA
2020 AnnuAl RepoRt
Corporate
Headquarters
LeMaitre Vascular, Inc.
63 Second Avenue
Burlington, MA 01803
USA
Tel: +1-781-221-2266
Fax: +1-781-425-5049
European
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 Sinagapore, Pte. Ltd.
138 Robinson Road
#12-02 Oxley Tower
068906, Singapore
Tel: +65 6813 0281
www.lemaitre.com