2022 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 Singapore, 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, 2022
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)
63 Second Avenue, Burlington, Massachusetts
(Address of principal executive offices)
04-2825458
(I.R.S. Employer Identification No.)
01803
(Zip Code)
Registrant’s telephone number, including area code 781-221-2266
Title of each class
Common stock, $0.01 par value per share
Securities registered under Section 12(b) of the Act:
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. ☑
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant
included in the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based
compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
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 $879,119,100 computed
by reference to the last reported sale price of $45.55 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.
At February 24, 2023, the registrant had 22,097,304 shares of common stock, par value $0.01 per share, outstanding.
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.
DOCUMENTS INCORPORATED BY REFERENCE
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LEMAITRE VASCULAR
2022 ANNUAL REPORT ON FORM 10-K
TABLE OF CONTENTS
PART I
Item 1. Business .......................................................................................................................................................
Item 1A. Risk Factors .................................................................................................................................................
Item 1B. Unresolved Staff Comments ........................................................................................................................
Item 2. Properties .....................................................................................................................................................
Item 3. Legal Proceedings ........................................................................................................................................
Item 4. Mine Safety Disclosures ..............................................................................................................................
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities .................................................................................................................................................
Item 6. Reserved ......................................................................................................................................................
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations .......................
Item 7A. Quantitative and Qualitative Disclosures About Market Risk .....................................................................
Item 8. Financial Statements and Supplementary Data ............................................................................................
Item 9. Changes In and Disagreements With Accountants on Accounting and Financial Disclosure .....................
Item 9A. Controls and Procedures ..............................................................................................................................
Item 9B. Other Information ........................................................................................................................................
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections .........................................................
PART III
Item 10. Directors, Executive Officers and Corporate Governance ...........................................................................
Item 11. Executive Compensation .............................................................................................................................
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters ....
Item 13. Certain Relationships and Related Transactions, and Director Independence .............................................
Item 14. Principal Accounting Fees and Services ......................................................................................................
PART IV
Item 15. Exhibits and Financial Statements Schedules ..............................................................................................
Item 16. Form 10-K Summary ...................................................................................................................................
SIGNATURES ..................................................................................................................................................................
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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 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 status of our global regulatory approvals and compliance with regulatory
requirements to market and sell our products both in the US and outside of the US; 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;
and the risk that the Company is not successful in transitioning to a direct-selling model in new territories.
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,
LeverEdge, LifeSpan, Omniflow, ProCol, Pruitt, Pruitt F3, Pruitt-Inahara, RestoreFlow, Syntel, TRIVEX, TufTex,
VascuCel, VascuTape, Wovex and XenoSure are registered trademarks of LeMaitre Vascular or one of its subsidiaries, and
AlboSure, Chevalier, DuraSure, Flexcel, 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 degree, 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 and are well known to vascular surgeons. Our principal product
offerings are sold globally, primarily in the United States, Europe, Canada and Asia Pacific. We estimate that the annual
worldwide market for peripheral vascular devices exceeds $5 billion, within which we estimate that the market for our
products is approximately $750 million.
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We sell our products and services primarily through a direct sales force. As of December 31, 2022, our sales force
was comprised of 131 sales representatives in North America, Europe and Asia Pacific, 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
European sales offices in Milan, Italy; Madrid, Spain; and Hereford, England. Our Asia Pacific headquarters is located in
Singapore, and we also have Asia-Pacific sales offices in Tokyo, Japan; Shanghai, China; Kensington, Australia; and Seoul,
Korea. During the years ended December 31, 2022 and 2021, approximately 94% of our net sales were generated in
territories in which we employ direct sales representatives. We also sell our products in other countries through distributors.
Since March 2020, the COVID-19 pandemic has significantly impacted the markets for our products as well as our
business. In response to COVID-19, many hospitals limited elective procedures in response to the onset of the pandemic
and then periodically when infection rates have increased. Many of our devices are used in elective procedures.
Additionally, our sales representatives’ access to hospitals and surgeons has periodically been restricted by hospitals or
local governments. More recently, however, in many geographies we have seen restrictions eased. Since 2020, these
dynamics have resulted in variable and unpredictable sales.
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. In many cases peripheral vascular
disease goes undetected, sometimes leading to life-threatening events including stroke, ruptured aneurysm, pulmonary
embolism or death. 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 market.
Vascular surgeons treat peripheral vascular disease and perform vascular procedures associated with other diseases,
such as end-stage renal disease. We estimate that there are more than 21,000 vascular surgeons worldwide. 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 2022, over 95% of our net sales were from devices used in open
surgical procedures.
Our Business Strategies
We have grown our business by using a simple 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, to a lesser
extent, 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.
● Focused call point. We have historically directed our product offering and selling efforts towards the vascular
surgeon, and estimate that in 2022 approximately 80% of our sales were from devices and cryopreserved tissue
used by vascular surgeons. As vascular surgeons are typically positioned to perform both open vascular
surgeries and endovascular 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.
● Low rivalry niche segments. We seek to build and maintain leading positions in niche segments, which we
define as under $200 million in annual worldwide revenue. We believe that the relative lack of 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
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those segments are highly differentiated, such as the Artegraft biologic graft, Omniflow II biosynthetic graft, or
RestoreFlow cadaveric tissue.
● 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. We ended 2022 with 131 direct sales representatives, including two export
managers. 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, 2022, approximately 94% 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
continually evaluate the acquisition of additional product lines and businesses that may be complementary to our
product offerings, refine our current product lines or develop new applications for our existing technologies. We
also 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 24 complementary acquisitions as well as research and development, we
have expanded to 16 product lines, which include 13 different product types:
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
VascuTape
TufTex
Pruitt F3 Shunt
Credent
AnastoClip
Endomed
LeverEdge
Vascular Architects
UnBalloon
AlboGraft
LifeSpan
XenoSure
Clinical Instruments
TRIVEX
Omniflow II
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
We manufacture most of our devices in-house, having relocated the manufacturing operations of 19 of our 24
acquisitions to our Burlington, Massachusetts headquarters. The human tissue processing and cryopreservation operations
associated with RestoreFlow allografts take place in our Fox River Grove, Illinois facility. Artegraft biologic graft
production takes place in our North Brunswick, New Jersey facility. On a limited basis, we use third party manufacturers
and we currently purchase our CardioCel and VascuCel patches from Anteris Technologies Ltd (formerly Admedus Ltd) in
Malaga, Australia. We are in the process of relocating the production of these CardioCel and VascuCel patches to our
Burlington headquarters.
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Our Products and Services
We have a portfolio of 16 product lines, which include 13 different product types, most of which are used to treat
vascular disease, and most of which are used in open vascular surgery and dialysis access. We also offer human vascular
tissue cryopreservation services. No single product line accounted for more than 20% of our revenues in 2022, 2021 or
2020.
Our 13 product offerings include a suite of biologic products. 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) and RestoreFlow Allograft
cryopreservation services (human cadaveric tissue). These biologic offerings represented 49% of our sales in 2022, 48% of
our sales in 2021, and 43% in 2020.
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, as well as in cardiac repair and reconstruction.
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. 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 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.
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 VascuCel and CardioCel biologic patches are acellular, collagen bioscaffolds with optimized biocompatibility
and zero aldehyde toxicity. These bovine pericardium patches are used in vessel repair as well as heart repair and
reconstruction, including neonatal repairs.
Carotid Shunts
Our Pruitt F3 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 shunt features internal balloon fixation. Our Flexcel shunt is a
non-balloon shunt offered for surgeons who prefer external fixation.
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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 enable 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 with optional
full or partial external spiral support. Our stepped and tapered LifeSpan grafts are designed to reduce the risk of steal
syndrome and high cardiac output, complications that sometimes arise in dialysis access grafts.
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 or fluoroscope. 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.
Valvulotomes
Our valvulotomes 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 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 hospital stays and the likelihood of wound complications.
Sales and Marketing
As of December 31, 2022, we employed 131 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 94% of 2022 net sales occurred in territories in which we employ sales representatives. Outside
our direct markets, we generally sell our products through country-specific distributors.
Our marketing efforts include direct mail, digital marketing and exhibitions at medical congresses, which we believe
are important to our brand development. We believe that marketing allows us to connect with vascular surgeons who are
beyond the reach of our direct sales force and also reinforces our brand recognition and product offering to current
customers.
We also provide training to our vascular surgeons on specific procedures including in situ bypass, carotid
endarterectomy and interrupted anastomosis, as well as a general surgical skills training program targeting less-experienced
doctors as a way to introduce them to our product offerings.
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Research and Development
Our more recent research and development efforts have focused on cardiac allograft and next-generation powered
phlebectomy projects, as well as manufacturing transfers, including the transfer of the manufacturing of VascuCel and
CardioCel biologic patches and the OmniFlow II product line to Burlington. In addition, in 2022 our research and
development group continued to provide support to our growing regulatory and clinical efforts. In 2022 we completed the
relocation work for the OmniFlow II product line and were granted approval to market devices manufactured in Burlington
in the European Union. Additionally, a significant portion of the CardioCel and VascuCel transfer to Burlington has been
completed and we anticipate that we will apply for regulatory approval to market those devices in the United States and
European Union in 2023.
We often use feedback received from independent physicians to demonstrate product functionality before
commencing full-scale marketing of any product. To this end, we have initiated the Limited Market Release (LMR) of the
next-generation powered phlebectomy device, PhasTIPP, in the United States. Approximately half of the necessary LMR
cases have been completed and we anticipate a full launch in the United States in the first half of 2023. Separately, in 2022
we began the review and update of the manufacturing process of the Artegraft product line in an effort to apply for its
European MDR CE Mark. We will prioritize the “Artegraft MDR Readiness” project within the department and expect this
to consume significant resources over the next two years.
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 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 clinical trials in an effort to obtain the approval of our XenoSure patch in China for cardiac and vascular
indications. We have completed enrollment of the trials and submitted the cardiac license application in June, 2022. We
expect to make our vascular submission to the Chinese National Medical Products Administration (NMPA) in 2023. In
2021 we also entered into an agreement with Anteris (formerly Admedus) to assume primary responsibility for the post-
market clinical follow-up studies of our CardioCel and VascuCel products.
In 2017 the European Union adopted the new Medical Device Regulation (2017/745) (MDR), which replaced the
European Medical Devices Directive (93/42/EC as amended by 2007/47/EC) (MDD) and which took effect as of May 26,
2021. After this date, our MDD certificates then in effect remain valid until their expiration dates, which range from August
2023 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. In the first quarter of
2023, we received our first MDR CE marking for our F3 Shunt product line. 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 North
Brunswick, New Jersey where Artegraft is produced, and Fox River Grove, Illinois where RestoreFlow allografts are
processed.
Our strategy is to transfer the manufacturing of most acquired lines into our Burlington operations. In 2019, we
expanded our biologic clean room, and in 2020, we began the manufacturing transfer of Omniflow II in this new clean
room. In 2020, we completed the transfer of the Syntel embolectomy business we had acquired from Applied Medical. In
2019, we leased a fifth Burlington building and relocated substantially all of our administrative functions into this building
so we could expand our manufacturing footprint. In 2021, we completed the construction of another biologic clean room
where we will manufacture CardioCel and VascuCel. Additionally, in 2022, we expanded the footprint of our main
cleanroom and raw materials warehouse by approximately 40% in an effort to accommodate increased production and the
direct labor hiring surge that occurred in 2021 and 2022. We believe that this expansion will improve working efficiency
for our current operations staff.
We manufacture certain proprietary components, assemble most of our devices ourselves, and inspect, test, and
package all of our finished products. By 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
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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 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 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 North Brunswick 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 periodic 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 Abbott, Baxter International, Inc., Artivion, Becton, Dickinson and
Company, Cardiovascular Systems, Inc., Edwards Lifesciences Corporation, Getinge, LifeNet Health, Silk Road Medical,
Terumo Medical Corporation, and W. L. Gore & Associates.
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.
The success of our products relies on effective service support as well as superior product technology, quality,
product and service availability, reliability, ease of use, cost-effectiveness, physician familiarity, and brand recognition.
While we also compete on the basis of price, our more technologically advanced products are often sold at higher prices.
We believe our continued success may depend on our ability to broaden and optimize our direct sales channel, acquire
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
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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.
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, and our issued U.S. patents are set to expire from
2023 to 2031.
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, Artegraft, XenoSure, Pruitt, VascuTape,
Glow ‘N Tell and RestoreFlow, each of which is registered in the U.S., the European Union, or both, and in certain cases in
other foreign countries.
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 Artegraft biologic graft we acquired in June 2020. 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.
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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 Artegraft
biologic vascular graft.
After a device receives 510(k) clearance, any modification that could significantly affect its safety or effectiveness, or
that would constitute a major change as specified by FDA guidelines, requires a new 510(k) clearance. The FDA requires
each manufacturer to make this determination in the first instance, but the FDA can review any such decision. If the FDA
disagrees with a manufacturer’s decision not to seek a new 510(k) clearance, the agency may retroactively require the
manufacturer to seek 510(k) clearance. The FDA also can require the manufacturer to cease marketing and/or recall the
modified device until 510(k) clearance or PMA approval is obtained. Also, the manufacturer may be subject to significant
regulatory fines or penalties.
PMA Approval. The PMA approval pathway requires proof of the safety and effectiveness of the proposed device to
the FDA’s satisfaction, making this pathway much more costly, lengthy, and uncertain. A PMA application must provide
extensive preclinical and clinical trial data, as well as detailed information about the device and its components regarding,
among other things, device design, manufacturing, and labeling. As part of the PMA review, the FDA will typically inspect
the manufacturer’s facilities for compliance with the Quality System Regulation (QSR) which imposes elaborate testing,
control, documentation, and other quality assurance procedures on the manufacturing process.
If the FDA approves a PMA, the approved indications or claims may be more limited than those originally sought.
The PMA can include post-approval conditions that the FDA believes to be necessary to ensure the safety and effectiveness
of the device including, among other things, restrictions on labeling, promotion, sale, and distribution. Failure to comply
with the conditions of approval can result in material adverse enforcement action, including the loss or withdrawal of the
approval. Even after approval of a PMA, a new PMA or PMA supplement is required if the device or its labeling or
manufacturing process are modified. Supplements to a PMA often require the submission of the same type of information
required for an original PMA, except that the supplement is generally limited to that information needed to support the
proposed change from the product covered by the original PMA.
Clinical Trials. A clinical trial is typically required to support a PMA application and is sometimes required to
support 510(k) clearance. In some cases, one or more smaller feasibility Investigational Device Exemption (IDE) studies
may precede a pivotal IDE clinical trial intended to comprehensively demonstrate the safety and effectiveness of the
investigational device. All clinical studies of investigational devices must be conducted in compliance with the FDA’s
extensive requirements. If an investigational device could pose a significant risk to patients (as defined in the regulations),
the FDA, prior to initiation of clinical use, must approve an IDE application showing that it is safe to test the device in
humans and that the testing protocol is scientifically sound. A non-significant risk device does not require submission to the
FDA of an IDE application. Both significant risk and non-significant risk investigational devices require approval from
institutional review boards (IRBs) at the 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 Artegraft vascular grafts,
which had PMA approval at the time we acquired the device.
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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;
● QSR compliance, which requires finished device manufacturers, including third-party or contract manufacturers,
to follow stringent design, testing, control, documentation, and other quality assurance procedures in all aspects
of manufacturing;
●
labeling regulations and FDA prohibitions against the promotion of products for uncleared, unapproved, or off-
label uses and other requirements related to promotional activities;
● medical device reporting regulations, which require that manufacturers report to the FDA if their device may
have caused or contributed to a death or serious injury or malfunctioned in a way that would likely cause or
contribute to a death or serious injury if the malfunction were to recur; and
●
corrections and removal reporting regulations, which require that manufacturers report to the FDA any field
corrections and product recalls or removals if undertaken to reduce a risk to health posed by the device or to
remedy a violation of the FDCA that may present a risk to health.
We are subject to inspection and marketing surveillance by the FDA to determine our compliance with regulatory
requirements. The most recent FDA inspection of our Burlington facility was in May 2022, the results of which yielded five
sets of observations that were subsequently addressed to the FDA’s satisfaction. 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.
We participate in the Medical Device Single Audit Program (MDSAP), which allows manufacturers to undergo a
universal quality system audit that is accepted in the United States, Japan, Australia, Canada and Brazil in lieu of individual
routine audits by each regulator. Maintenance of this certification is a requirement to maintain sales in certain geographies
including Canada. Failure to maintain this certification in good standing could result in suspension of our sales efforts in
Canada or the other geographies. Our last MDSAP audit was in March 2022 and the results of the audit were deemed
satisfactory by SGS, our notified body.
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 Chandler, Arizona
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 July 2018 and the results of that inspection were satisfactory. In the event of non-compliance with these regulations, the
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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. 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 (NOTA), 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
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 MDD, and
more recently, the MDR, which are applicable to our products. Devices that comply with the requirements of the MDD and
MDR are entitled to bear a CE mark, indicating that the device conforms with the essential requirements of the applicable
directive/regulations 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/regulations into its respective national law and has each established a “Competent Authority” to apply the
directive/regulations in its territory.
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The MDD and MDR classification system places devices into Class I, IIa, IIb, or III, depending on the risks and
characteristics of the medical device. The MDD and MDR also define the essential requirements (or general safety
performance 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 and MDR set 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 MDD and the MDR. 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 currently
use three Notified Bodies for our various products. We have received CE marks under the MDD to sell most of our
products and have one product CE marked under the MDR.
In April 2017, the EU adopted the new MDR regulations for medical devices, which replace the MDD and which
took effect as of 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 continue their transition from MDD to MDR, they have begun to enforce these more
rigorous requirements on us in order to maintain the CE marks on certain of our products. Additionally, for any of our
products for which the CE marks under MDD lapsed before May 26, 2021, we will need to reinitiate the application process
in its entirety under the MDR, a process that could take up to two years for each product. As of May 26, 2021 we had two
products’ CE marks lapse which represented less than 1% of our EU sales, and we have only recently started the application
process for one of those products. If we fail to obtain new CE marks on these products or any of 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. In January 2023,
we received our first CE marking under the MDR for our Pruitt F3 Shunt. The CE Marks for our CardioCel and Vascucel
products are currently set to expire in August 2023. We expect to submit our MDR application in June 2023 and will
experience a lapse in CE validity until such approvals are rendered, which could take 24 months. If we cannot obtain an
interim approval, our inventory may not be sufficient to support sales, and that could hurt our sales in the EU.
The United Kingdom left the EU on January 31, 2020, which is commonly referred to as “Brexit”. We opened our
Hereford, England office in 2019 largely in response to 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. We have complied with this deadline and all of our CE marks continue to
be recognized in the U.K. The U.K. Medicines and Healthcare Products Regulatory Agency (“MHRA”) has announced that
CE marking will continue to be recognized in the U.K. and certificates issued by EU-recognized notified bodies will
continue to be valid in the U.K. market until July 1, 2024. After this date, all devices marketed in the U.K. will require U.K.
Conformity Assessed (“UKCA”) Marks certified by a U.K. Approved Body. If we fail to obtain UKCA conformity by this
July 2024 deadline, or at all, our sales in the U.K. could be negatively affected. In January 2023 we received our first
UKCA mark for the Pruitt F3 Shunt.
In the event that any of our products prove 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
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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 Unites States 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 Vaughan, Canada office, and we must maintain a valid Medical Device Single Audit
Program (MDSAP) certificate. Our Vaughan, Canada office was most recently inspected in August 2017, the results of
which were satisfactory. Our Burlington office was most recently audited under the MDSAP in March 2022, the results of
which were satisfactory.
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. 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 March 2022, 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 (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 most recently inspected in March 2022 under the MDSAP, the results of which were satisfactory. 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
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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 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 our distributors 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.
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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 617 employees, including 591 full-time employees, at December 31, 2022. Our full-time employees are
comprised functionally as follows: 327 manufacturing and operations, 175 sales and marketing, 51 general and
administrative and 38 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.
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. In 2022, we increased our employer medical
benefits contribution for hourly employees to 85% and implemented an annual Loyalty Award bonus program for hourly
employees as well. We also work with external benefits consultants to evaluate the quality, competitiveness, and cost of our
benefit offerings to all our employees.
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 2022, we increased our headcount by 141 full-time
employees and our world-wide voluntary resignation rate was 14.7%.
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 2022.
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 from “LeMaitre Vascular” 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.
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In addition, our Corporate Governance Guidelines, Code of Business Conduct and Ethics and Charters of our Audit,
Compensation and Nominating and Corporate Governance Committees are available on our website and are available in
print to any stockholder who requests such information.
Item 1A. Risk Factors
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.
We may experience significant fluctuations in our quarterly and annual results.
Risks Related to Our Business
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;
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 and our ability to impose price increases;
productivity of our sales force;
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;
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prohibit unit sales in the future;
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; and
the loss of any significant customer, especially in regard to any product or service that has a limited customer
base.
These factors, some of which are not within our control, may cause the price of our common stock to fluctuate. 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.
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If we are unable to expand our product and service offerings, we may not achieve our growth objectives and our results
of operations could suffer.
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 2022 over 95% of our sales were from
devices used in open vascular or other open surgical procedures.
A core component of our growth strategy is the acquisition of complementary product lines, principally in the open
vascular surgery space. The number of appropriately sized targets in the open vascular surgery space is limited, and if we
are unable to execute on our acquisition strategy (or we do not expand the scope of our acquisition strategy), growth of our
sales may be inhibited.
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, or
acquiring new products, 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;
identify suitable acquisition targets in the open vascular surgery space and execute on the acquisition of such
targets;
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, whether through internal development or by acquisition,
we may not achieve our growth objectives and our results of operations as well as our stock price could suffer.
We may not be able to return to our historic levels of profit growth.
Our annual operating income for 2022 was 26% lower than 2021. This was due in part to substantial investments we
made in growing our sales force and our direct labor pool in 2022. There can be no assurance that we will be able to
achieve profit growth in 2023 or in future years. If we are unable to effectively manage our operating expenses due to, for
example, increased headcount, we may need to implement cost-cutting measures 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:
the level and timing of future sales, manufacturing costs and operating expenses;
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fluctuations in foreign currency exchange rates;
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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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If we do not comply with international regulatory requirements to market our products outside the United States or are
required to modify our operations or products as a result of such requirements, our business will be harmed.
Sales of medical devices outside the United States are subject to international regulatory requirements that vary from
country to country. These requirements and the amount of time required for approval may differ from our experiences with
the U.S. FDA. In some countries, 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 currently regulated in the European Union (EU) and the United Kingdom under the MDD and the
MDR. 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 or MDR, and manufacturers of higher-risk devices generally must use a “Notified
Body”—an appointed independent third party to assess conformity. We currently use three Notified Bodies for our various
products. We have received CE marks under the MDD to sell most of our products and have recently received our first CE
mark under the MDR for our Pruitt F3 Shunt.
In April 2017, the EU adopted new regulations for medical devices, the MDR, which replace the MDD and which
took effect as of May 26, 2021. Our products will eventually be fully 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 transition from MDD to MDR, they have begun to impose more rigorous requirements on us. Nearly
all of our products have been submitted to our Notified Bodies for review under the MDR. 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 MDR CE marks for our existing products, 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. These types of more stringent restrictions on our products as they transition to MDR could impact sales of our
products and/or their gross margins could be adversely impacted. For example, under the MDD CE mark issued for
XenoSure in 2021, the indications for its use no longer include neuro or cardiac applications, indications for which the
product was previously approved. We estimate that the removed indications may have caused a loss of approximately $0.5
million of annual sales in 2022. Additionally, for a time, only XenoSure made from bovine pericardium sourced from
certain of our suppliers was permitted to be sold under the new CE mark, which was a condition of its issuance. In 2022, we
successfully reinstated the previously un-approved supplier. Additionally, significant changes to our devices may trigger a
requirement to file or obtain an MDR CE mark earlier than expected, which could result in supply chain delays.
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 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.
As a result of the United Kingdom’s exit from the European Union, the U.K. Medicines and Healthcare Products
Regulatory Agency (“MHRA”) has announced that CE marking will continue to be recognized in the U.K. and certificates
issued by EU-recognized Notified Bodies will continue to be valid in the U.K. market until July 1, 2024. Following such
date, all devices marketed in the U.K. will require U.K. Conformity Assessed (“UKCA”) Marks certified by a U.K.
Approved Body. If we fail to obtain UKCA marks by this July 1, 2024 deadline, or at all, our sales in the U.K. could be
negatively affected.
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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. 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.
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 may 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. Beginning with the quarter ended September 30, 2020 and for each quarter thereafter, our revenues
have increased as compared to the prior year quarters.
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, as well as reduced surgeon training. While we expect the impacts of COVID-19 may have a continued 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.
Supply chain disruptions could adversely impact our operations and financial condition.
Global supply chains have been disrupted as a result of the COVID-19 pandemic. Accordingly, the availability of
raw materials and components used in the manufacture of our products may be adversely impacted. Additionally, even
when we are able to source such materials and components, they may cost more and may only be available on a delayed
basis. Higher materials and component costs could adversely affect our margins if we are unable to pass such costs along
to customers in the form of price increases. Delays in receipt of materials and components could also interrupt our
production and cause us to go into backorder on certain of our products, further exacerbating the global supply chain
disruption.
We may experience difficulties in sourcing, acquiring and integrating 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, particularly in the open vascular market. We have not
completed an acquisition since 2020. 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;
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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 transferring, 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;
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 would be senior to our common stock, would require
interest payments to our lenders, and could restrict our ability to pay dividends to our shareholders.
For example, the manufacturing process for our Omniflow II graft, which we acquired in 2014, was transferred to our
Burlington headquarters due to our discontinuation of operations in North Melbourne, Australia in June 2020. The MDD
CE mark for Omniflow II has been secured and Burlington-built product has not been routinely available for sale on the
European market. Most of our Omniflow II inventory held by our European subsidiary, however, has been depleted, and as
a result we have experienced backorders, which will continue until we are able to ship sufficient quantities of Omniflow II
from Burlington to Europe. Backorders for Omniflow II were approximately $1.0 million at December 31, 2022. If the
ramp-up of Omniflow II shipments to Europe is materially delayed, our European revenues could be further impacted and
our business could be harmed.
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 2022, over 95% of our net sales were from devices used in open vascular or other open surgical 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
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.
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CardioCel, and selected other devices, are 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. Selected Xenosure and
RestoreFlow devices are also sold to call points other than the vascular surgeon.
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:
compliance with regulatory and legal requirements specific to human tissue or changes in those requirements;
● maintenance of quality standards and controls to mitigate the risk that processed tissue cannot be sterilized;
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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;
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.
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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, 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 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 until January 2024. 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
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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. In some cases, changes to raw material suppliers or use of
alternative raw materials may require significant testing and subsequent approval by our regulatory bodies. These approval
processes could result in significant delays or refusal to approve, which could further limit our ability to deliver products to
our customers and harm our sales.
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 a manufacturing site in North Brunswick, New Jersey 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 and Cardial vascular grafts, Artegraft biologic patch, XenoSure biologic patch, ProCol vascular graft
and CardioCel and VascuCel patch products contain bovine tissue or material derived from bovine sources, and our
Omniflow II Biosynthetic Vascular Graft contains ovine tissue. 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 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.
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We face intense competition from other companies, technologies, and alternative medical procedures and we may not be
able to compete effectively.
The segments in which we operate 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 which are larger than us and 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, 2022, 2021 and 2020, 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 and carotid shunt 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;
if competitors introduce lower-priced products of comparable safety and efficacy; or
if customers engage in information sharing regarding competitive pricing of medical devices.
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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, 2022, 39%
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 or other anti-corruption laws by our
personnel, distributors and other agents, especially in areas with heightened corruption risk such as China and
Russia;
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;
clawback of funds spent on healthcare in excess of budgeted amounts by foreign governments ;
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 the 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.
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From time to time, we are involved in litigation where the outcome is uncertain and which could entail significant
expense.
We are subject, from time to time, to legal proceedings and litigation, including, but not limited to, actions relating to
product liability, employment matters, intellectual property, contract disputes and other commercial matters. Because the
outcome of litigation is inherently difficult to predict, it is possible that the outcome of litigation, or even simply the
defense of litigation, could entail significant cost for us, 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 typically of one to three 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 capital and other
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, the Korean won and the Australian dollar. For the year
ended December 31, 2022, 39% 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. In 2022, the strong dollar decreased our net sales by
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$6.1 million. 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, 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
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If any or all of the foregoing were to occur, our business, results of operations, and brand could be materially
adversely affected.
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.
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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 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, including, but not limited to, warning letters, fines and penalties, injunctions, civil or
criminal charges, mandatory recalls, and withdrawal of clearances to sell products.
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 efforts to ensure that our quality systems and the operation of our
manufacturing facilities remain in compliance with U.S, and non-U.S. regulatory requirements, that audits 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 participate in the Medical Device Single Audit (MDSAP) program, which allows manufacturers to undergo a
universal quality system audit that is accepted in the United States, Japan, Australia, Canada and Brazil in lieu of individual
routine audits by each regulator. Maintenance of this certification is a requirement to maintain sales in certain geographies
including Canada. Failure to maintain this certification in good standing could result in suspension of our sales efforts in
Canada or other geographies.
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.
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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 prove 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, 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
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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 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 or from gaining access to our proprietary information and technology.
We have few patents on our technology. Even where we do have patents, the issuance of a patent is not always
conclusive as to its validity or enforceability. Any patents we have obtained or could obtain in the future might also be
invalidated or circumvented by third parties. Additionally, competitors may be able to design around our patents to produce
alternative, non-infringing designs. In such cases, 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 often seek patent protection for their novel 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;
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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
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
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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actual or anticipated fluctuations in our operating results or future prospects;
changes in our growth rates or our competitors’ growth rates;
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;
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.
30
The stock market has experienced extreme price and volume fluctuations that have often been unrelated or
disproportionate to the operating performance of individual companies. The market price of our common shares may also
fluctuate significantly due to a variety of factors unrelated to our financial results, including political instability, natural
disasters, pandemics (such as COVID-19), war and/or events of terrorism; comments by securities analysts; and general
market conditions in our industry or in the economy as a whole. Broad market and industry factors may seriously affect the
market price of companies’ stock, including ours, regardless of actual operating performance. In the past, following periods
of volatility in the overall market and the market price of a particular company’s securities, securities class action litigation
has often been instituted against these companies. This litigation, if instituted against us, could result in substantial costs
and a diversion of our management’s attention and resources.
Our chief executive officer has significant voting power and may take actions that may not align with the interests of our
other stockholders.
Our chief executive officer controls approximately 11% of our outstanding common stock as of December 31, 2022.
As a result, he 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.
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.
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 21,410
square foot leased facility located in Sulzbach, Germany, with a lease expiring in June 2031. We also lease additional
manufacturing, processing, distribution and sales offices in other U.S., Europe, U.K. and Asia Pacific 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,
2022, 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.
31
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 February 24, 2023, the closing price per share of our common stock was $51.29 as reported on The Nasdaq
Global Market, and we had approximately 147 stockholders of record. In addition, we believe that a significant number of
beneficial owners of our common stock hold their shares in street name.
Dividends
In February 2011, our Board of Directors approved a policy for the payment of quarterly cash dividends on our
common stock. In 2022, we paid a quarterly cash dividend of $0.125 per share and, in 2021, we paid a quarterly cash
dividend of $0.110 per share. On February 21, 2023, our Board of Directors approved a quarterly cash dividend on our
common stock of $0.14 per share payable on March 23, 2023, to stockholders of record at the close of business on March 9,
2023, which will total approximately $3.1 million. 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.
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, 2017, through the end of LeMaitre’s fiscal year ended December 31, 2022. The graph assumes an investment
of $100.00 made on December 31, 2017, 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.
32
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.
12/17
12/18
12/19
12/20
12/21
12/22
74.87 115.13 131.35 164.34 152.19
LeMaitre Vascular, Inc ......................................... 100.00
97.16 132.81 192.47 235.15 158.65
NASDAQ Composite ........................................... 100.00
NASDAQ Medical Equipment ............................. 100.00
59.54
85.34
62.72
2022 Peer Group .................................................. 100.00 128.51 138.64 183.32 230.41 200.59
61.17
88.20
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
peer group includes the following companies: AngioDynamics, Inc., Artivion, Inc., Atricure, Inc., Cardiovascular Systems
Inc., Inari Medical, Inc., Merit Medical Systems, Inc., Penumbra, Inc., Shockwave Medical, Inc., and Silk Road Medical,
Inc.
33
Recent Sales of Unregistered Securities
Not Applicable.
Issuer Purchases of Equity Securities
Issuer Purchases of Equity Securities
Total
Number of
Shares (or
Units)
Purchased (1)
Average
Price
Paid Per
Share
(or Unit)
Period
of Shares
(or Units)
Maximum
Number (or
Total Number Approximate
Dollar Value)
Purchased as
Part of
Publicly
Announced
Plans
or Program
of Shares
(or Units)
that may yet
be Purchased
under the
Plans or
Program
October 1, 2022 through October 31, 2022 ..........
November 1, 2022 through November 30, 2022 ..
December 1, 2022 through December 31, 2022 ...
- $
55 $
10,521 $
-
53.24
46.58
N/A
N/A
N/A
Total .....................................................................
10,576 $
46.61
N/A
N/A
N/A
N/A
N/A
(1) For the three months ended December 31, 2022, we repurchased 10,576 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. Reserved
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 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 degree, 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 and are well known to vascular surgeons. Our principal product offerings are
sold globally, primarily in the United States, Europe, Canada and Asia Pacific. We estimate that the annual worldwide
market for peripheral vascular devices exceeds $5 billion, within which we estimate that the market for our products is
approximately $750 million. We have grown our business using a simple 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, to a lesser extent, developing complementary devices. We have used acquisitions as a primary means of
further penetrating the peripheral vascular device market, and we expect to continue this strategy in the future. We currently
manufacture most of our products in our Burlington, Massachusetts headquarters.
34
Our products and services are used primarily by vascular surgeons who treat peripheral vascular disease through both
open surgical methods and endovascular techniques. In contrast to interventional cardiologists and interventional
radiologists, vascular surgeons can perform both open surgical and minimally invasive endovascular procedures, and
therefore can provide a wider range of treatment options to their patients. More recently, however, 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.
Since March 2020, the COVID-19 pandemic has significantly impacted the markets for our products as well as our
business. In response to COVID-19, many hospitals limited elective procedures at the onset of the pandemic and then
periodically when infection rates have increased. Many of our devices are used in elective procedures. Additionally, our
sales representatives’ access to hospitals and surgeons has periodically been restricted by hospitals or local governments.
More recently, however, in many geographies we have seen restrictions eased. Since 2020, these dynamics have resulted in
variable and unpredictable sales.
Our principal product lines include the following: anastomotic clips, biologic vascular and dialysis grafts, biologic
vascular and cardiac patches, carotid shunts, embolectomy catheters, occlusion catheters, radiopaque marking tape,
synthetic vascular and dialysis grafts, and valvulotomes. Through our RestoreFlow allografts business, we also provide
services related to the processing and cryopreservation of human vascular and cardiac tissue.
Our principal biologic offerings include vascular and cardiac patches as well as vascular and dialysis grafts. In 2022,
biologics represented 49% of our worldwide sales. We view the biologic device offerings favorably, as we believe they
represent differentiated and in some cases growing product segments.
To assist us in evaluating our business strategies, we monitor long-term technology trends in the peripheral vascular
device market. Additionally, we consider the information obtained from discussions with the medical community in
connection with the demand for our products, including potential new product launches. We also use this information to
help determine our competitive position in the peripheral vascular device market and our manufacturing capacity
requirements.
Our business opportunities include the following:
●
adding complementary products through acquisitions;
●
●
growing our direct sales force in the United States, Europe, the United Kingdom, Canada and Asia Pacific,
including replacing a distributor with our sales personnel;
introducing our products into new territories upon receipt of regulatory approvals or registrations in these
territories;
●
increasing the average selling prices of our devices;
●
consolidating and automating product manufacturing at our Burlington, Massachusetts facilities, and
●
updating existing products and introducing new products through research and development.
We sell our products and services primarily through a direct sales force. As of December 31, 2022, our sales force
was comprised of 131 sales representatives in North America, Europe and Asia Pacific, 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 headquarters is located in Singapore,
and we also have sales offices in Tokyo, Japan; Shanghai, China; Kensington, Australia; and Seoul, Korea. During the
years ended December 31, 2022 and 2021, approximately 94% of our net sales were generated in territories in which we
employ direct sales representatives. We also sell our products in other countries through distributors.
Historically we have experienced success in lower-rivalry niche segments. In the valvulotome market, for example,
our highly differentiated devices have historically allowed us to increase our selling prices while maintaining unit share. In
contrast, we have experienced less success in highly competitive markets such as the polyester vascular graft market, where
we face competition from larger companies with greater resources and lower per unit costs. While we believe these
35
challenging market dynamics can be mitigated by our relationships with vascular surgeons, there can be no assurance that
we will succeed in highly competitive markets.
We have also experienced success in international markets, such as Europe, where we have a significant sales force,
and 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 strategy for growing our business includes the acquisition of complementary product lines and companies,
which can be difficult to identify, negotiate and purchase, and there can be no assurance that we will be able to do so in the
future.
●
●
●
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 Admedus 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.
Occasionally we discontinue or divest products or product lines that are no longer complementary to our business or
that are not commercially viable.
● During 2021, we made decisions to wind down or discontinue our TRIVEX powered phlebectomy systems,
remote endarterectomy devices and surgical glue. These product lines totaled approximately $2.2 million in
2021 revenues.
● During 2022, we made the decision to wind down the ProCol graft, AlboSure polyester patch, LeverEdge and
Latis graft cleaning catheter product lines. These products totaled approximately $1.0 million in 2021 revenues.
From time to time we may undertake SKU reductions and transition sales to other SKUs or products with similar
features. For example, in 2022, we decided to initiate the transition of sales of our Syntel spring tip catheter to our Syntel
regular tip catheter. Any of these actions may result in inventory write-offs and temporary or permanent negative impacts to
our sales, gross margin and customer relationships.
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:
● During 2020, we entered into definitive agreements with, or participated with Admedus in concluding
agreements with, several former Admedus distributors in Europe and Canada, in order to terminate their
distribution of our bovine cardiac and vascular patch products previously distributed by Admedus, and we began
selling direct-to-hospital 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-hospital throughout the United States.
●
In May 2022, we entered into a distribution transition agreement with our Korean distributor in order to sell
products directly in Korea and dissolve the existing distribution arrangement. We began selling direct-to-
hospital in December 2022. The distribution termination fees totaled approximately $0.5 million.
36
We also rely, to a much lesser extent, on internal product development efforts to bring differentiated technologies
and next-generation products to market:
●
In 2020, we launched RestoreFlow cardiac allografts for use in cardiac repair and restoration.
●
In March 2022, we received U.S. FDA clearance to market PhasTIPP, a portable powered phlebectomy device
used to remove varicose veins in the leg. We expect to launch this product in 2023.
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 June 2014, we acquired the Omniflow II ovine graft business from BioNova, International. In June 2019, we
initiated a project to transfer the production of these devices to our Burlington facilities. We received approval
to sell these devices in Europe in June 2022. We expect this transfer to be substantially complete in 2023.
In October 2019, we acquired the CardioCel and VascuCel biologic patch businesses from Admedus. In July
2020, we initiated a project to transfer the production of these devices to our Burlington facilities. We expect
this transfer to be substantially complete in 2023.
In June 2022, we closed our St. Etienne, France factory in order to streamline manufacturing operations and to
reduce expenses. The Cardial business previously conducted at the St. Etienne facility consisted of the
manufacturing of polyester vascular grafts, valvulotomes, surgical glue and select OEM devices. We expect to
transition Cardial graft sales to our Burlington-manufactured polyester vascular graft product (Albograft) for
additional cost savings and improved margins. We acquired the Cardial business in 2018.
Our execution of these initiatives may affect the comparability of our financial results and may cause fluctuations
from period to period as we incur related process engineering and other charges.
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, 2022, approximately 39% of our sales took place outside of 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 2022, we estimate that the effects of changes in foreign exchange rates
decreased our reported sales by approximately $6.1 million, as compared to rates in effect for 2021.
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 in turn sell to hospitals and clinics. In certain cases our products are held on
consignment at a hospital or clinic prior to purchase; in those instances we recognize revenue at the time the product is used
in surgery rather than at shipment.
Cost of sales. We manufacture 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 the 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, sales meetings, attendance at vascular congresses, training programs, advertising
and product promotions, direct mail and other marketing costs.
37
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 primarily includes costs associated with obtaining
and maintaining regulatory approval of our products, salaries, laboratory testing and supply costs. It also includes costs
associated with the design and execution of clinical studies, costs to register, maintain, and defend our intellectual property,
and costs to transfer the manufacturing of acquired product lines to our Burlington facility. Also included are costs
associated with the design, development, testing and enhancement of new or existing products.
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
Since March 2020, the COVID-19 pandemic has significantly impacted the markets for our products as well as our
business. In response to COVID-19, many hospitals limited elective procedures at the onset of the pandemic and then
periodically when infection rates have increased. Many of our devices are used in elective procedures. Additionally, our
sales representatives’ access to hospitals and surgeons has periodically been restricted by hospitals or local governments.
More recently, in many geographies we have seen restrictions eased. These dynamics have resulted in, and we expect will
continue to result in, variable and unpredictable sales.
As described above, our results could be materially 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, 2022 to the year ended December 31, 2021
The following tables set forth, for the periods indicated, our net sales by geography, and the change between the
specified periods expressed as a percentage increase or decrease:
Net sales ................................................... $
161,651 $
($ in thousands)
154,424 $
7,227
5%
2022
2021
$ Change
Percent
change
Net sales by geography:
Americas ............................................... $
Europe, Middle East and Africa ...........
Asia Pacific ...........................................
Total...................................................... $
109,439 $
41,854
10,358
161,651 $
102,265 $
42,132
10,027
154,424 $
7,174
(278)
331
7,227
7%
(1%)
3%
5%
Net sales. Net sales increased $7.2 million, or 5%, to $161.7 million for the year ended December 31, 2022,
compared to $154.4 million for the year ended December 31, 2021. The increase was driven primarily by increased bovine
graft sales of $2.9 million, carotid patch sales of $2.4 million, shunt sales of $2.4 million, and allograft preservation
services of $1.7 million. The increased sales were partially offset by decreased ovine graft sales of $1.5 million (largely due
to regulatory and production related back-orders which totaled approximately $1.0 million at year end) and surgical glue
sales of $0.7 million. We estimate that the stronger U.S. dollar decreased net sales by $6.1 million during the year ended
December 31, 2022 as compared to the year ended December 31, 2021.
During the years ended December 31, 2022 and 2021, approximately 94% of our net sales were direct-to-hospital.
38
Net sales by geography. Net sales in the Americas increased $7.2 million, or 7%, for the year ended December 31,
2022 as compared to the year ended December 31, 2021. The increase was driven primarily by increased bovine graft sales
of $2.9 million, allograft preservation services of $1.3 million, shunt sales of $1.1 million, valvulotomes sales of $0.9
million, and carotid patch sales of $0.6 million.
EMEA net sales decreased $0.3 million, or 1%, for the year ended December 31, 2022 as compared to the year ended
December 31, 2021. The decrease was driven primarily by a comparatively stronger dollar in 2022, as well as decreased
ovine graft sales of $1.5 million (largely due to regulatory and production related back-orders which totaled approximately
$1.0 million at year end), and surgical glue sales of $0.7 million. The decreased sales were partially offset by increased
shunt sales of $1.4 million and carotid patch sales of $1.1 million.
Asia Pacific net sales increased $0.3 million, or 3%, for the year ended December 31, 2022 as compared to the year
ended December 31, 2021. The increase was driven primarily by increased carotid patch sales of $0.7 million and
embolectomy catheters sales of $0.3 million. The increased sales were partially offset by a comparatively stronger dollar in
2022, as well as decreased occlusion catheters, valvulotome, shunt, and clip sales of $0.1 million each.
The following table sets forth the change in our gross profit and gross margin for the periods indicated:
2022
2021
Change
Percent
change
Gross profit .............................. $
104,896 $
($ in thousands)
101,382 $
3,514
Gross margin ............................
64.9%
65.7%
-0.8%
3%
*
* Not applicable
Gross Profit. Gross profit increased $3.5 million, or 3%, to $104.9 million for the year ended December 31, 2022,
and gross margin decreased by 80 basis points to 64.9% in the period. The increase in gross profit was driven primarily by
increased sales from bovine grafts, carotid patches, and shunts. The decrease in the gross margin was driven primarily by
unfavorable changes in foreign currency exchange rates, manufacturing inefficiencies largely related to increased direct
labor and quality costs, and unfavorable product mix including higher sales of comparatively lower margin embolectomy
catheters and polyester grafts and lower sales of comparatively higher margin valvulotomes.
Operating Expenses
The following tables set forth changes in our operating expenses for the periods indicated and the change between the
specified periods expressed as a percentage increase or decrease:
2022
2021
$ change
Percent
change
($ in thousands)
2022 as a % 2021 as a %
of Net Sales of Net Sales
Sales and marketing ................... $ 32,921 $ 27,655 $
General and administrative ......... 28,745 25,501
Research and development ......... 13,294 11,801
Restructuring ..............................
-
$ 78,067 $ 64,957 $
3,107
5,266
3,244
1,493
3,107
13,110
19%
13%
13%
*
20%
20%
18%
8%
2%
48%
18%
17%
8%
0%
42%
* Not a meaningful percentage.
Sales and marketing. For the year ended December 31, 2022, sales and marketing expense increased 19% to $32.9
million. The increase was driven primarily by higher salaries and related expenses of $4.1 million, including higher sales
commissions of $1.4 million. From December 31, 2021 to December 31, 2022, we increased our sales representative
headcount from 103 to 131. We also added two additional regional sales managers in the period. Travel and related
expenses were also higher by $0.8 million. Expense reduction programs implemented in 2020 through 2021 in response to
COVID-19, including a reduction in sales force, lowered expenses for the year ended December 31, 2021. We have since
rehired in many areas, including our sales force. As a percentage of net sales, sales and marketing expense increased to 20%
for the year ended December 31, 2022, up from 18% in the prior period.
39
General and administrative. For the year ended December 31, 2022, general and administrative expenses increased
13% to $28.7 million. The increase was driven primarily by higher salaries and related expenses of $2.7 million due to an
increase in personnel. Additionally, in 2021 we recognized a gain of $0.5 million related to the amendment of a contingent
purchase obligation associated with our 2019 Admedus biologic patch acquisition which lowered general and
administrative expenses. As a percentage of sales, general and administrative expense increased to 18% for the year ended
December 31, 2022, up from 17% in the prior period.
Research and development. For the year ended December 31, 2022, research and development expense increased
13% to $13.3 million. The increase was driven primarily by higher salaries and related expenses of $1.1 million due to an
increase in personnel. Outside services and testing also increased by $0.5 million primarily due to higher third-party costs
associated with European regulatory approvals. Our products are currently regulated in the European Union (EU) and the
United Kingdom under the European Medical Devices Directive (MDD) and the Medical Device Regulation (MDR). In
order to market our medical devices in the EU and the United Kingdom, we are required to obtain CE marks, which denote
conformity to the essential requirements of the MDD or MDR. As a percentage of sales, total research and development
expense was 8% for both 2022 and 2021.
Restructuring. For the year ended December 31, 2022, restructuring expense was $3.1 million. On June 30, 2022 we
ceased operations at our St. Etienne, France factory. The closure resulted in a restructuring charge of $3.1 million for the
year ended December 31, 2022. Charges primarily consisted of employment termination costs, impairment of fixed assets
and inventory, and third-party costs. We did not record additional expenses related to the closure subsequent to June 30,
2022.
Income tax expense. We recorded a tax provision of $6.9 million on pre-tax income of $27.5 million for the twelve
months ended December 31, 2022, compared to $7.4 million on pre-tax income of $34.3 million for the twelve months
ended December 31, 2021.
Our effective income tax rate was 27.8% and 24.9% for the three- and twelve-month periods ended December 31,
2022. Our tax expense for 2022 is based on an estimated annual effective tax rate of 26.0%, adjusted in the applicable
quarterly periods for discrete stock option exercises and other discrete items. Our income tax expense for 2022 varies from
the statutory rate mainly due to permanent items, different statutory rates from our foreign entities, and a discrete item for
stock option exercises.
Our effective income tax rate was 21.9% and 21.5% for the three- and twelve-month periods ended December 31,
2021. Our 2021 provision was based on an estimated annual effective tax rate of 24.7%, adjusted in the applicable quarterly
period for discrete stock option exercises and other discrete items. Our income tax expense for 2021 varied from the
statutory rate mainly due to federal and state tax credits, permanent items, different statutory rates from our foreign entities,
and a discrete item for stock option exercises.
We monitor the mix of profitability by tax jurisdiction and adjust our annual expected rate on a quarterly basis as
needed. While it is often difficult to predict the final outcome or timing of the resolution for any particular tax matter, we
believe 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, 2022, we have provided a valuation allowance of $1.6 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.
Beginning in 2022, the Tax Cuts and Jobs Act of 2017 eliminated the option to deduct research and development
expenditures immediately in the year incurred and requires taxpayers to amortize such expenditures over five years for tax
purposes. This provision resulted in a cash tax liability for the 2022 tax year of approximately $0.7 million. Our net
deferred tax assets increased in 2022 by approximately $0.7 million as a result as well. This provision is also expected to
increase our 2023 cash tax liability. The actual impact on 2023 cash tax liability will depend on the amount of research and
development expenses paid or incurred in 2023 among other factors. While the largest impact of this provision will be to
2022 cash tax liability, the impact will continue over the five-year amortization period, but will decrease ratably over the
period.
40
The Inflation Reduction Act ("IRA") was enacted into law on August 16, 2022. Included in the IRA was a provision
to implement a 15% corporate alternative minimum tax on “adjusted financial statement income” for applicable
corporations and a 1% excise tax on repurchases of stock. These provisions are effective for tax years beginning after
December 31, 2022. We are in the process of evaluating the provisions of the IRA, but we do not currently believe the IRA
will have a material impact on our reported results, cash flows or financial position when it becomes effective.
Comparison of the year ended December 31, 2021 to the year ended December 31, 2020
The following tables set forth, for the periods indicated, our net sales by geography, and the change between the
specified periods expressed as a percentage increase or decrease:
2021
Percent
$ Change change
2020
($ in thousands)
Net sales ................................................... $ 154,424 $ 129,366 $
25,058
19%
Net sales by geography:
81,470 $
Americas .............................................. $ 102,265 $
39,193
42,132
Europe, Middle East and Africa ...........
8,703
10,027
Asia Pacific ..........................................
Total ..................................................... $ 154,424 $ 129,366 $
20,795
2,939
1,324
25,058
26%
7%
15%
19%
As a general matter, the COVID-19 pandemic negatively impacted sales in 2020 more acutely than in 2021 in all
geographies, though we believe that it continued to negatively impact sales throughout 2021.
Net sales. Net sales increased $25.1 million, or 19%, to $154.4 million for the year ended December 31, 2021,
compared to $129.4 million for the year ended December 31, 2020. The increase was driven largely by Artegraft bovine
grafts, with increased sales of $14.1 million. We acquired Artegraft on June 22, 2020, so we had six additional months of
sales of Artegraft in 2021 as compared to 2020 and we also implemented a price increase in January 2021. We also had
higher valvulotome sales of $3.4 million, higher bovine carotid patch sales of $2.4 million, higher carotid shunt sales of
$1.9 million, and higher allograft service revenues of $1.8 million. We estimate that the weaker U.S. dollar increased sales
by $2.0 million during year ended December 31, 2021 as compared to year ended December 31, 2020.
Direct-to-hospital net sales were 94% of our total net sales for the year ended December 31, 2021, and 95% for the
year ended December 31, 2020.
Net sales by geography. Net sales in the Americas increased $20.8 million, or 26%, for the year ended December 31,
2021 as compared to December 31, 2020. The increase was driven mainly by Artegraft bovine grafts, with increased sales
of $14.1 million. We also had higher valvulotome sales of $2.4 million, higher allografts service revenues of $1.8 million,
higher bovine carotid patch sales of $1.5 million and higher carotid shunt sales of $1.2 million. Offsetting these increases
were lower bovine cardiac patch revenues of $0.4 million. Revenues from all other products increased $0.2 million on a net
basis.
EMEA net sales increased $2.9 million, or 7%, for the year ended December 31, 2021 as compared to December 31,
2020. The increase was driven by higher valvulotome sales of $1.0 million, as well as higher carotid shunt sales of $0.6
million, higher embolectomy catheter sales of $0.5 million, higher bovine cardiac patch sales of $0.4 million and higher
ovine graft sales of $0.3 million. These increases were offset in part by a decreases in sales of bovine carotid patches and
polyester grafts of $0.3 million each. EMEA revenues from all other products increased $0.8 million on a net basis.
Asia Pacific net sales increased $1.3 million, or 15%, for the year ended December 31, 2021 as compared to
December 31, 2020, with bovine carotid patch sales increasing $1.1 million, and embolectomy catheter sales, bovine
cardiac patch sales and carotid shunt sales each increasing $0.1 million. These and other product sales increases were
partially offset by lower sales of TRIVEX powered phlebectomy systems of $0.1 million.
41
The following table sets forth the change in our gross profit and gross margin for the periods indicated:
2021
2020
Change
Percent
change
Gross profit .............................. $
101,382 $
($ in thousands)
84,618 $
16,764
Gross margin ............................
65.7%
65.4%
0.3%
20%
*
* Not a meaningful percentage.
Gross Profit. Gross profit increased $16.8 million, or 20%, to $101.4 million for the year ended December 31, 2021
as compared to December 31, 2020, while gross margin increased by 30 basis points to 65.7%. The increase in gross profit
was driven partly by the impact in the prior period of purchase accounting from the Artegraft bovine graft acquisition. We
also had a more favorable product mix in 2021 as compared to 2020, including higher Artegraft sales at an increased
average selling price in 2021. This favorable impact was partly offset by manufacturing inefficiencies and higher excess
and obsolescence expense by $2.3 million in 2021 due in large part to the discontinuation or winding down of certain
product lines including TRIVEX and remote endarterectomy devices.
In May 2021, our CE mark certifications required to sell products in many EMEA countries were reinstated for five
products. However, we also simultaneously received a change in CE mark requirements for certain bovine carotid patches
and polyester grafts. For bovine carotid patches, only bovine pericardium sourced from certain of our suppliers are
permitted to be sold under the new CE mark, which caused our production costs to increase, and our gross margin to
decrease.
Operating Expenses
The following tables set forth changes in our operating expenses for the periods indicated and the change between the
specified periods expressed as a percentage increase or decrease:
2021
2020
$ change
2021 as a 2020 as a
Percent
change
% of Net
Sales
% of Net
Sales
Sales and marketing ..................... $
General and administrative ...........
Research and development ...........
Gain on divestures and
27,655 $
25,501
11,801
23,700 $
22,501
10,099
($ in thousands)
3,955
3,000
1,702
acquisitions ...............................
$
-
64,957 $
(470 )
55,830 $
470
9,127
17 %
13 %
17 %
*
16 %
18%
17%
8%
0%
42%
18%
17%
8%
(0%)
43%
* Not a meaningful percentage.
Sales and marketing. For the year ended December 31, 2021, sales and marketing expense increased 17% to
$27.7 million. The increase was driven by more sales personnel, as well as higher salaries and related expenses of $3.5
million, including higher commissions due to increased sales, and higher recruiting costs. We also had higher marketing-
related costs, such as product samples and promotional materials, of $0.4 million, and higher travel and related expenses of
$0.1 million. As a percentage of net sales, sales and marketing expense was unchanged at 18% in both 2021 and 2020.
General and administrative. For the year ended December 31, 2021, general and administrative expenses increased
13% to $25.5 million. The increase was primarily due to higher compensation and related expenses, as salaries were
reinstated in September 2020 and personnel were rehired following the April 2020 reduction in force. We also had higher
insurance costs, banking fees and professional fees in 2021. As a percentage of sales, general and administrative expense
was unchanged at 17% for both comparative periods.
42
Research and development. For the year ended December 31, 2021, research and development expense increased
$1.7 million, or 17%, to $11.8 million. Product development and process engineering expenses were on a combined basis
unchanged, as those groups continue their focus on manufacturing transfer projects. Clinical and regulatory expenses,
however, increased $1.7 million, or 29%, driven by higher compensation expenses as well as consulting and other costs
incurred in connection with reinstating or maintaining regulatory approvals, especially in Europe. As a percentage of sales,
total research and development expense was unchanged at 8% in both years. Product development expenses decreased to
1% of sales for the year ended December 31, 2021, from 2% in the prior period.
Gain on sale of building. During the third quarter of 2020, in connection with our planned manufacturing transfer of
our Omniflow II ovine biologic graft to Burlington, we sold our land and building located in North Melbourne, Australia.
We recognized a gain on the sale during the three months ending September 30, 2020, net of applicable sales taxes and
administrative costs, of $0.5 million.
Income tax expense. We recorded a tax provision of $7.4 million on pre-tax income of $34.3 million for the twelve
months ended December 31, 2021, compared to $6.1 million on pre-tax income of $27.4 million for the twelve months
ended December 31, 2020.
Our effective income tax rate was 21.9% and 21.5% for the three- and twelve-month periods ended December 31,
2021. Our tax expense for 2021 is based on an estimated annual effective tax rate of 24.7%, adjusted in the applicable
quarterly periods for discrete stock option exercises and other discrete items. Our income tax expense for 2021 varies from
the statutory rate mainly due to federal and state tax credits, permanent items, different statutory rates from our foreign
entities, and a discrete item for stock option exercises.
Our effective income tax rate was 21.2% and 22.4% for the three- and twelve-month periods ended December 31,
2020. Our 2020 provision was based on an estimated annual effective tax rate of 25.2%, adjusted in the applicable quarterly
period for discrete stock option exercises and other discrete items. Our income tax expense for 2020 varied from the
statutory rate mainly due to federal and state tax credits, permanent items, different statutory rates from our foreign entities,
and a discrete item for stock option exercises.
We monitor the mix of profitability by tax jurisdiction and adjust our annual expected rate on a quarterly basis as
needed. While it is often difficult to predict the final outcome or timing of the resolution for any particular tax matter, we
believe 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, 2021, we have provided a valuation allowance of $1.7 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.
Liquidity and Capital Resources
At December 31, 2022, our cash and cash equivalents were $19.1 million as compared to $13.9 million at December
31, 2021. We also had $63.6 million in short-term marketable securities as of December 31, 2022 and $56.1 million as of
December 31, 2021. Our cash and cash equivalents are highly liquid investments with maturities of 90 days or less at the
date of purchase, and consist primarily of operating bank accounts. 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, and a short-duration bond fund. At December 31, 2022 our short-term marketable securities reflected an
unrealized loss of $1.8 million as a result of increasing market interest rates.
On July 16, 2021, we closed an offering of 1,000,000 shares of our common stock, $0.01 par value per share, at a
price to the public of $54.50 per share less underwriting discounts. The net proceeds, after deducting the underwriting
discounts and other offering expenses, were approximately $51.0 million. We used a portion of the proceeds from the
offering to repay our outstanding debt. We plan to use the remaining proceeds for general corporate purposes, including
working capital needs and capital expenditures, dividend payments, deferred payments related to prior acquisitions, and the
funding of future acquisitions. On August 4, 2021, the underwriters purchased an additional 150,000 shares pursuant to an
option granted to them in connection with the offering described above. The net proceeds to the Company, after deducting
underwriting discounts and other offering expenses, were approximately $7.6 million. We plan to use the proceeds for
general corporate purposes.
43
On February 21, 2023, our Board of Directors authorized the repurchase of up to $25.0 million of the Company’s
common stock through transactions on the open market, in privately negotiated purchases or otherwise until February 21,
2024. 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 bore 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. In
July 2021, we repaid the balance under the term loan, plus accrued interest, in full.
In November 2021, we terminated the credit agreement, including the revolving line of credit, as allowed for in the
original agreement.
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 $26.8 million for the year ended December 31, 2022, $36.4 million for the year
ended December 31, 2021, and $28.8 million for the year ended December 31, 2020. We expect to fund any increased costs
and expenditures from our existing cash and cash equivalents, though our future capital requirements depend on numerous
factors. These factors include, but are not limited to, the following:
●
the revenues generated by sales of our products and services;
●
payments associated with potential future quarterly cash dividends to our common stockholders;
●
future acquisition-related payments;
●
payments associated with 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 U.S. FDA and other regulatory clearances of our existing and future
products;
●
the costs associated with obtaining European MDR clearances for our existing and future products;
●
the number, timing, and nature of acquisitions, divestitures and other strategic transactions, and
●
potential future share repurchases.
Our cash balances may decrease as we continue to use cash to fund our operations, make acquisitions, 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 and to meet our known long-term cash requirements. 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 take out a loan. The sale of additional equity and debt securities may result in dilution to our
stockholders, as was the case with our July 2021 equity offering. 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.
44
Cash Flows
2022
Year ended December 31,
2021
($ in thousands)
2020
Cash and cash equivalents
$
19,134 $
13,855 $
26,764
Cash flows provided by (used in):
Operating activities .................. $
Investing activities ...................
Financing activities ..................
25,378 $
(10,371)
(9,234)
35,102 $
(61,076)
13,702
34,800
(52,891)
32,155
Net cash provided by operating activities. Net cash provided by operating activities was $25.4 million for the year
ended December 31, 2022, and consisted of $20.6 million net income, adjusted for non-cash items of $18.1 million
(including primarily depreciation and amortization of $9.4 million, stock-based compensation of $4.2 million, provisions
for inventory write-offs and doubtful accounts of $3.2 million, and loss on divestitures of $2.0 million, offset by foreign
currency transaction effect on income of $0.3 million, benefit for deferred income taxes of $0.2 million, gain on sale of
building of $0.1 million, and fair value adjustments on contingent consideration for acquisitions of $0.1 million), as well as
cash used for working capital of $13.4 million. The net cash used for working capital was driven by increases in inventory
and other deferred costs of $7.4 million, increases in accounts receivable of $3.5 million, and increases in prepaid and other
assets of $3.1 million, offset by increases in accounts payable and other liabilities of $0.6 million.
Net cash provided by operating activities was $35.1 million for the year ended December 31, 2021, and consisted of
$26.9 million net income, adjusted for non-cash items of $18.1 million (including primarily depreciation and amortization
of $11.1 million, stock-based compensation of $3.5 million, provisions for inventory write-offs and doubtful accounts of
$4.0 million, offset by fair value adjustments on contingent consideration for acquisitions of $0.7 million), as well as cash
used for working capital of $9.9 million. The net cash used for working capital was driven by increases in inventory and
other deferred costs of $5.5 million, increases in prepaid and other assets of $1.9 million, a decrease in accounts payable
and accrued expenses of $1.7 million and an increase in accounts receivable of $0.8 million.
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 used in investing activities. Net cash used in investing activities was $10.4 million for the year ended
December 31, 2022, including purchases of marketable securities of $8.0 million and purchases of property and equipment
of $3.2 million, offset by proceeds from the sale of the St. Etienne, France building of $0.9 million.
Net cash used in investing activities was $61.1 million for the year ended December 31, 2021, including net sales of
marketable securities of $56.2 million and purchases of property and equipment of $4.9 million.
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 of marketable securities of $20.7 million and proceeds from
the sale of the North Melbourne, Australia building of $2.0 million.
Net cash provided by (used in) financing activities. Net cash used in financing activities was $9.2 million for the
year ended December 31, 2022. Use of cash included dividend payments of $11.0 million and deferred payments for
acquisitions of $1.1 million. These uses of cash were offset by proceeds from stock option exercises of $2.8 million, net of
shares repurchased to covered employee payroll taxes on restricted stock unit (RSU) vestings.
45
Net cash provided by financing activities was $13.7 million for the year ended December 31, 2021. Sources of cash
included primarily net proceeds from an equity offering of $58.7 million and proceeds from stock option exercises of $3.7
million, net of shares repurchased to cover employee payroll taxes on RSU vestings. These sources of cash were offset by
payments made on our long-term debt of $39.0 million, dividend payments of $9.3 million and deferred payments for
acquisitions of $0.4 million.
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.
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 2022
March 8, 2022 March 24, 2022 $
May 17, 2022
June 2, 2022 $
August 25, 2022 September 8, 2022 $
November 17, 2022 December 1, 2022 $
Fiscal Year 2021
March 9, 2021 March 25, 2021 $
May 19, 2021
June 3, 2021 $
August 26, 2021 September 9, 2021 $
November 19, 2021 December 2, 2021 $
0.125 $
0.125 $
0.125 $
0.125 $
0.110 $
0.110 $
0.110 $
0.110 $
2,743
2,745
2,750
2,750
2,262
2,267
2,401
2,405
On February 21, 2023, our Board of Directors approved a quarterly cash dividend on our common stock of $0.14 per
share payable on March 23, 2023, to stockholders of record at the close of business on March 9, 2023, which will total
approximately $3.1 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, inventory valuation, valuation of intangible assets and goodwill, contingent
consideration 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.
46
We believe that the following financial estimates and related accounting policies are both important to the portrayal
of our financial condition and results of operations and require subjective or complex judgments. Further, we believe that
the items discussed below are properly recorded in our consolidated financial statements for all periods presented.
Management has discussed the development, selection and disclosure of our most critical financial estimates with the audit
committee of our board of directors and our independent registered public accounting firm. The judgments about those
financial estimates are based on information available as of the date of our consolidated financial statements. Those
financial estimates and related policies include:
Revenue Recognition
Our revenue is derived primarily from the sale of disposable or implantable devices used during vascular surgery. We
sell primarily directly to hospitals and to a lesser extent to distributors, as described below, and, during the periods
presented in our consolidated financial statements, entered into consigned inventory arrangements with either hospitals or
distributors on a limited basis. We also derive revenues from the processing and cryopreservation of human tissue for
implantation in patients. These revenues are recognized when services have been provided and the tissue has been shipped
to the customer, provided all other revenue recognition criteria discussed in the succeeding paragraph have been met.
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.
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 France 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.
47
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 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.
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 $46.5
million as of December 31, 2022 and $52.7 million as of December 31, 2021. Goodwill was $65.9 million as of both
December 31, 2022 and December 31, 2021.
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, 2022,
2021, and 2020, 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 amounts 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
48
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.
Our policy is to classify interest and penalties related to unrecognized tax benefits as income tax expense.
Recent Accounting Pronouncements
From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (FASB)
or other standard setting bodies and are generally adopted by the Company as of a specified effective date. Unless
otherwise discussed, the Company believes that the impact of recently issued standards that are not yet effective will not
have a material impact on its financial position or results of operations upon adoption.
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 both fiscal 2022 and 2021, 39% 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 2022 or 2021. 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, 2022 and 2021, we recorded $0.4 million and $0.1 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 $2.2 million for 2022.
Interest Rate Risk
At December 31, 2022, we held $19.1 million in cash and cash equivalents and $63.6 million in a short-term
managed income mutual fund investment. We believe that a hypothetical 10% increase or decrease in interest rates could
have a material impact on our cash balances and financial position, results of operations or cash flows. At December 31,
2022 our short-term marketable securities reflected an unrealized loss of $1.8 million as a result of increasing market
interest rates.
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.
49
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, 2022, 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, 2022.
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, 2022.
Our internal control over financial reporting as of December 31, 2022 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, 2022 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.
50
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, 2022, 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, 2022, 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, 2022,
and our report dated March 1, 2023 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 1, 2023
51
Item 9B. Other Information
Not Applicable.
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
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 2023 definitive proxy statement (2023 Definitive Proxy Statement) for the
2023 annual meeting of stockholders to be filed with the Securities and Exchange Commission within 120 days after the
fiscal year ended December 31, 2022.
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 2023
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 2023 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 2023 Definitive Proxy
Statement.
52
Equity Compensation Plan Information
The following table sets forth information regarding our equity compensation plans in effect as of December 31,
2022. 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 ....................................................................
1,021,592 $
38.43
438,478
(a)
(b)
(c)
Equity compensation plans not approved by security
holders ....................................................................
Total ......................................
-
1,021,592 $
-
38.43
-
438,478
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
2023 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 2023 Definitive Proxy Statement.
53
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
Exhibit Description
2.3
2.4
Asset Purchase Agreement dated October 11, 2019 between
the Registrant and Admedus Ltd and certain of its
subsidiaries
Amendment No. 1 to Asset Purchase Agreement dated
October 11, 2019 between the Registrant and Admedus
Ltd(now known as Anteris Technologies Ltd) and certain of
its subsidiaries.
Incorporated By Reference
Form
Date
SEC File
Number
Filed
Herewith
10-K
3/12/20 001-33092
8-K
9/1/21
001-33092
2.5^
Asset Purchase Agreement, dated June 22, 2020, by and
between the Company and Artegraft, Inc.
8-K
6/24/20
001-33092
3.1
3.2
3.3
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
4.1
Specimen Certificate evidencing shares of common stock
S-1/A 6/22/06
333-133532
54
Exhibit
Number
Exhibit Description
4.2
10.1
Description of Securities Registered pursuant to
Section 12 of the Securities Exchange Act of 1934, as
amended
Northwest Park Lease dated March 31, 2003, by and
between the Registrant and Roger P. Nordblomand
Peter C. Nordblom, as Trustees of Northwest
Associates, as amended
Incorporated By Reference
Form
Date
SEC File
Number
Filed
Herewith
10-K
3/12/20 001-33092
S-1
4/25/06
333-133532
10.2
Director Compensation Policy
10-Q
8/5/21
001-33092
10.3†
Executive Retention and Severance Agreement dated
October 10, 2005, by and between the Registrantand
George W. LeMaitre
S-1/A
5/26/06 333-133532
10.4†
Employment Agreement dated June 20, 2006, by and
between the Registrant and David Roberts
S-1/A
6/22/06 333-133532
10.5†
Employment Agreement dated April 20, 2006, by and
between the Registrant and Joseph P. Pellegrino
S-1/A
6/22/06 333-133532
10.6†
Form of Indemnification Agreement between the
Registrant and its directors and executive officers
S-1/A
5/26/06
333-133532
10.7
10.8
10.9
Second Amendment of Lease dated May 21, 2007, by
and between Rodger P. Nordblom and Peter C.
Nordblom, as Trustees of Northwest Associates, and
Registrant
Third Amendment of Lease dated February 26, 2008,
by and between Rodger P. Nordblom and
Peter C.Nordblom, as Trustees of Northwest
Associates, and Registrant
Fourth Amendment of Lease dated October 31, 2008,
by and between Rodger P. Nordblom and
Peter C.Nordblom, as Trustees of Northwest
Associates, and Registrant
10.10†
First Amendment to Executive Retention and
Severance Agreement dated December 23, 2008, by
andbetween the Registrant and George W. LeMaitre
10.11†
First Amendment to Employment Agreement dated
December 19, 2008, by and between the Registrantand
David Roberts
10.12†
First Amendment to Employment Agreement dated
December 19, 2008, by and between the Registrantand
Joseph P. Pellegrino
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
55
8-K
6/15/07
001-33092
8-K
4/10/08
001-33092
10-K
3/31/09
001-33092
10-K
3/31/09
001-33092
10-K
3/31/09
001-33092
10-K
3/31/09
001-33092
10-K
3/29/10
001-33092
Exhibit
Number
Exhibit Description
Incorporated By Reference
Form
Date
SEC File
Number
Filed
Herewith
10.14
10.15
10.16
Northwest Park Lease dated March 23, 2010, by and between
Rodger P. Nordblom and Peter C. Nordblom, asTrustees 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
10-K
3/27/12
001-33092
10-K
3/27/12
001-33092
10.17
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
3/27/13
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†
Form of Restricted Stock Unit Award Agreement under the
LeMaitre Vascular, Inc. 2006 Stock Option AndIncentive
Plan
8-K
3/9/18
001-33092
10.24†
Form of Incentive Stock Option Agreement under the
LeMaitre Vascular, Inc. 2006 Stock Option And
IncentivePlan
10-K
3/9/18 001-33092
10.25†
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
10.26
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
10.28^
License Agreement dated October 11, 2019 between the
Registrant and Admedus Ltd and certain of its subsidiaries
10-K
3/12/20
001-33092
56
Exhibit
Number
Exhibit Description
Incorporated By Reference
Form
Date
SEC File
Number
Filed
Herewith
10.29
First Amendment of Lease dated October 29, 2019 between
NWP BUILDING 3 LLC and the Registrant
8-K
11/1/19 001-33092
10.30
Fifth Amendment of Lease dated October 29, 2019 between
NWP BUILDING 4 LLC and the Registrant
8-K
11/1/19
001-33092
10.31
Seventh Amendment of Lease dated October 29, 2019
between NWP BUILDING 5 LLC and the Registrant
8-K
11/1/19
001-33092
10.32
Lease dated November 26, 2019 between NWP Retail 18
LLC and the Registrant.
8-K
12/3/19
001-33092
10.35†
Eighth Amended and Restated Equity Award Grant Policy
8-K
7/9/21
001-33092
10.36†
Form of Restricted Stock Unit Award Agreement
– Performance Based Award under the LeMaitre Vascular,
Inc. 2006 Stock Option And Incentive Plan
10-K
2/28/22
001-33092
21.1
List of Subsidiaries
23.1
Consent of Grant Thornton LLP
24.1
31.1
31.2
32.1*
32.2*
Power of Attorney (included on the Signatures page of this
Annual Report on Form 10-K)
Certification of Chief Executive Officer, as required by
Rule 13a-14(a) or Rule 15d-14(a)
Certification of Chief Financial Officer, as required by
Rule 13a-14(a) or Rule 15d-14(a)
Certification of Chief Executive Officer, as required by
Rule 13a-14(b) or Rule 15d-14(b) and Section 1350 of
Chapter 36 of Title 18 of the United States Code (18 U.S.C.
§1350)
Certification of Chief Financial Officer, as required by
Rule 13a-14(b) or Rule 15d-14(b) and Section 1350 of
Chapter 36 of Title 18 of the United States Code (18 U.S.C.
§1350)
101.INS 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.
57
X
X
X
X
X
X
X
X
X
X
X
Exhibit
Number
Exhibit Description
Incorporated By Reference
Form
Date
SEC File
Number
Filed
Herewith
101.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).
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 is the type that LeMaitre
Vascular, Inc. treats as private and confidential.
Item 16. Form 10-K Summary.
Not applicable.
58
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 1, 2023.
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
/s/ GEORGE W. LEMAITRE
George W. LeMaitre
Chief Executive Officer and
Chairman of the Board
(Principal Executive Officer)
/s/ JOSEPH P. PELLEGRINO, JR.
Joseph P. Pellegrino, Jr.
Chief Financial Officer (Principal
Financial and Accounting
Officer) and Director
/s/ LAWRENCE J. JASINSKI
Lawrence J. Jasinski
Director
/s/ JOHN J. O’CONNOR
John J. O’Connor
Director
Date
March 1, 2023
March 1, 2023
March 1, 2023
March 1, 2023
President and Director
March 1, 2023
/s/ DAVID B. ROBERTS
David B. Roberts
/s/ JOHN A. ROUSH
John A. Roush
/s/ BRIDGET A. ROSS
Bridget A. Ross
Director
Director
/s/ MARTHA M. SHADAN
Martha M. Shadan
Director
59
March 1, 2023
March 1, 2023
March 1, 2023
INDEX TO FINANCIAL STATEMENTS
LeMaitre Vascular, Inc.
Consolidated Financial Statements
Report of Independent Registered Public Accounting Firm (PCAOB ID Number 248) ..............................................
Consolidated Balance Sheets as of December 31, 2022 and 2022 ...............................................................................
Consolidated Statements of Operations for the Years Ended December 31, 2022, 2021 and 2020 .............................
Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2022, 2021 and 2020 .........
Consolidated Statements of Stockholders’ Equity for the Years Ended December 31, 2022, 2021 and 2020 .............
Consolidated Statements of Cash Flows for the Years Ended December 31, 2022, 2021 and 2020 ............................
Notes to Consolidated Financial Statements ................................................................................................................
Page
61
62
63
64
65
66
67
60
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors and Stockholders
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, 2022 and 2021, the related consolidated statements of operations,
comprehensive income, changes in stockholders’ equity, and cash flows for each of the three years in the period ended
December 31, 2022, 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, 2022
and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31,
2022, 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, 2022, 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 1, 2023 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
Critical audit matters 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. We determined that
there are no critical audit matters.
/s/ GRANT THORNTON LLP
We have served as the Company’s auditor since 2015.
Boston, Massachusetts
March 1, 2023
61
LeMaitre Vascular, Inc.
Consolidated Balance Sheets
December 31, December 31,
2022
2021
(in thousands, except share data)
Assets ...........................................................................................................................
Current assets:
Cash and cash equivalents ........................................................................................ $
Short-term marketable securities ..............................................................................
Accounts receivable, net of allowances of $835 at December 31, 2022 and $679
at December 31, 2021 ...........................................................................................
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:
Accounts payable ...................................................................................................... $
Accrued expenses .....................................................................................................
Acquisition-related obligations .................................................................................
Lease liabilities - short-term .....................................................................................
Total current liabilities .................................................................................................
Lease liabilities - long-term ..........................................................................................
Deferred tax liabilities ..................................................................................................
Other long-term liabilities ............................................................................................
Total liabilities..............................................................................................................
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 23,655,716
shares at December 31, 2022, and 23,477,784 shares at December 31, 2021 .......
Additional paid-in capital .........................................................................................
Retained earnings ......................................................................................................
Accumulated other comprehensive loss ....................................................................
Treasury stock, at cost; 1,568,595 shares at December 31, 2022 and 1,554,905
shares at December 31, 2021 .................................................................................
Total stockholders’ equity ............................................................................................
Total liabilities and stockholders’ equity...................................................................... $
19,134 $
63,557
22,040
50,271
6,731
161,733
17,901
15,634
65,945
46,527
1,745
991
310,476 $
2,903 $
19,967
573
1,886
25,329
14,710
69
2,167
42,275
13,855
56,104
19,631
46,104
4,189
139,883
17,059
15,071
65,945
52,710
1,566
568
292,802
2,340
16,332
1,271
1,870
21,813
14,067
70
2,701
38,651
-
-
237
189,268
97,773
(6,031)
(13,046)
268,201
310,476 $
235
181,630
88,125
(3,435 )
(12,404 )
254,151
292,802
See accompanying notes to consolidated financial statements.
62
LeMaitre Vascular, Inc.
Consolidated Statements of Operations
2022
Year ended December 31,
2021
(in thousands, except per share data)
2020
Net sales ............................................................................................. $
Cost of sales .......................................................................................
161,651 $
56,755
154,424 $
53,042
129,366
44,748
Gross profit .........................................................................................
104,896
101,382
84,618
Sales and marketing ...........................................................................
General and administrative .................................................................
Research and development .................................................................
Restructuring ......................................................................................
Gain on sale of building .....................................................................
Total operating expenses ....................................................................
32,921
28,745
13,294
3,107
-
78,067
27,655
25,501
11,801
-
-
64,957
23,700
22,501
10,099
-
(470)
55,830
Income from operations ......................................................................
26,829
36,425
28,788
Other income (expense):
Interest income................................................................................
Interest expense ..............................................................................
Other income (loss), net ..................................................................
986
-
(325)
Income before income taxes ...............................................................
Provision for income taxes .................................................................
27,490
6,854
197
(2,219 )
(116 )
34,287
7,380
207
(1,310)
(329)
27,356
6,136
Net income ......................................................................................... $
20,636 $
26,907 $
21,220
Earnings per share of common stock:
Basic ............................................................................................... $
Diluted ............................................................................................ $
0.94 $
0.93 $
1.27 $
1.25 $
1.05
1.04
Weighted-average shares outstanding:
Basic ...............................................................................................
Diluted ............................................................................................
21,975
22,171
21,157
21,475
20,246
20,479
Cash dividends declared per common share ....................................... $
0.50 $
0.44 $
0.38
See accompanying notes to consolidated financial statements.
63
LeMaitre Vascular, Inc.
Consolidated Statements of Comprehensive Income
Year ended December 31,
2021
2020
2022
Net income ...................................................................................................... $
Other comprehensive income (loss):
Foreign currency translation adjustment, net ...............................................
Unrealized gain (loss) on short-term marketable securities .........................
Total other comprehensive income (loss) ........................................................
20,636 $
26,907 $
21,220
(1,071)
(1,525)
(2,596)
(1,604)
(306)
(1,910)
2,468
14
2,482
Comprehensive income ................................................................................... $
18,040 $
24,997 $
23,702
See accompanying notes to consolidated financial statements.
64
LeMaitre Vascular, Inc.
Consolidated Statements of Stockholders’ Equity
(in thousands, except share data)
Common Stock
Shares
Amount Capital Earnings Income (Loss) Shares
Amount
Retained Comprehensive Treasury Stock
Additional
Paid-in
Total
Stockholders’
Equity
Accumulated
Other
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 (loss) ...........
Issuance of common stock for stock
options exercised ......................................
Vested restricted stock units .......................
Stock-based compensation expense ...........
Repurchase of common stock for net
settlement of equity awards ......................
Common stock cash dividend paid .............
331,958
50,669
3
1
5,968
-
3,022
21,220
2,482
(7,695)
16,537
(570)
21,220
2,482
5,971
1
3,022
(570)
(7,695)
Balance at December 31, 2020 ................... 22,061,554
221 114,924
70,554
(1,525) 1,538,572 (11,602)
172,572
Net income ..................................................
Other comprehensive income (loss) ...........
Issuance of common stock, net of issuance
costs .......................................................... 1,150,000
12
58,683
26,907
(1,910)
Issuance of common stock for stock
options exercised ......................................
Vested restricted stock units .......................
Stock-based compensation expense ...........
Repurchase of common stock for net
settlement of equity awards ......................
Common stock cash dividend paid .............
217,121
49,109
2
-
4,544
-
3,479
(9,336)
16,333
(802)
26,907
(1,910)
58,695
4,546
-
3,479
(802)
(9,336)
Balance at December 31, 2021 ................... 23,477,784 $
235 $ 181,630 $
88,125 $
(3,435) 1,554,905 $(12,404) $
254,151
Net income ..................................................
Other comprehensive income (loss) ...........
Issuance of common stock for stock
options exercised ......................................
Vested restricted stock units .......................
Stock-based compensation expense ...........
Repurchase of common stock for net
settlement of equity awards ......................
Common stock cash dividend paid .............
133,963
43,969
1
1
3,465
-
4,173
20,636
(2,596)
(10,988)
13,690
(642)
20,636
(2,596)
3,466
1
4,173
(642)
(10,988)
Balance at December 31, 2022 ................... 23,655,716 $
237 $ 189,268 $
97,773 $
(6,031) 1,568,595 $(13,046) $
268,201
See accompanying notes to consolidated financial statements.
65
LeMaitre Vascular, Inc.
Consolidated Statements of Cash Flows
2022
Year ended December 31,
2021
(in thousands)
2020
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 ......................................
Gain on sale of building ........................................................................
Loss on divestitures ..............................................................................
Loss on disposal of PP&E ....................................................................
Foreign currency transaction effect on income .....................................
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 ..................................................
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 for net settlement of equity awards .......................
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 7 and 10). .....
20,636 $
26,907 $
21,220
9,433
4,173
(108)
637
2,572
(182)
(115)
1,954
95
(315)
(3,533)
(7,418)
(3,096)
645
25,378
(3,229)
858
-
(8,000)
-
(10,371)
(1,070)
-
-
-
-
-
3,466
(642)
(10,988)
(9,234)
(494)
5,279
13,855
19,134 $
11,070
3,479
(674)
263
3,779
79
-
-
-
163
(818)
(5,485)
(1,927)
(1,734)
35,102
(4,882)
-
-
(59,194)
3,000
(61,076)
(401)
-
-
-
(39,000)
-
63,241
(802)
(9,336)
13,702
(637)
(12,909)
26,764
13,855 $
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
See accompanying notes to consolidated financial statements.
66
LeMaitre Vascular, Inc.
Notes to Consolidated Financial Statements
December 31, 2022
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, radiopaque marking tape, synthetic vascular grafts and valvulotomes. Our
offices and production facilities are located in Burlington, Massachusetts; Fox River Grove, Illinois; North Brunswick, New
Jersey; Chandler, Arizona; Vaughan, Canada; Sulzbach, Germany; Milan, Italy; Madrid, Spain; Hereford, England;
Kensington, Australia; Tokyo, Japan; Shanghai, China; Singapore; and Seoul, Korea.
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, LeMaitre Pte Ltd, and
LeMaitre 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 our consolidated financial
statements and accompanying notes. 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. Our estimates and
assumptions, including those related to bad debts, inventory and other deferred costs, intangible assets, sales returns and
discounts, and income taxes are reviewed on an ongoing basis and updated as appropriate. Actual results could differ from
those estimates.
Revenue Recognition
Our revenue is derived primarily from the sale of disposable or implantable devices used during vascular surgery. We
sell primarily directly to hospitals and to a lesser extent to distributors, as described below, and, during the periods
presented in our consolidated financial statements, entered into consigned inventory arrangements with either hospitals or
distributors on a limited basis. We also derive revenues from the processing and cryopreservation of human tissues for
implantation in patients. These revenues are recognized when services have been provided and the tissue has been shipped
to the customer, provided all other revenue recognition criteria discussed in the succeeding paragraph have been met.
67
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):
Year ended December 31,
2022
2021
Americas .................................................................... $
Europe, Middle East and Africa .................................
Asia Pacific ................................................................
Total .................................................................... $
109,439 $
41,854
10,358
161,651 $
102,265
42,132
10,027
154,424
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 France 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.
68
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 returns 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:
2022
Year ended December 31,
2021
(in thousands)
2020
Advertising expense ............................ $
195 $
236 $
216
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. They include a managed income mutual fund investing mainly in short-
term investment-grade, U.S. dollar denominated fixed and floating rate debt, and a short-duration bond fund.
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 $10.3 million as of
December 31, 2022.
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.
69
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 Spain and France, may be subject to significant payment
delays due to government austerity measures impacting funding and payment practices. As of December 31, 2022 our
receivables in Spain and France totaled $0.8 million and $1.0 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, 2022, if significant changes were to occur in the payment practices of these
European governments or if government funding becomes unavailable, we may not be able to collect on receivables due to
us from these customers and our write offs of uncollectible amounts may increase.
We write off accounts receivable when they become uncollectible. Such credit losses have historically been within
our expectations and allowances. The allowance for doubtful accounts is our best estimate of the amount of probable credit
losses in our existing accounts receivable. We review our allowance for doubtful accounts on a monthly basis and all past
due balances are reviewed individually for collectability. The provision for the allowance for doubtful accounts is recorded
in general and administrative expenses. The following is a summary of our allowance for doubtful accounts and sales
returns:
Balance at
Beginning
of Period
Additions
(recoveries)
charged
to Income
Deductions
Balance at
from
Reserves
End of
Period
(in thousands)
Allowance for doubtful accounts and sales
returns:
Year ended December 31, 2022 .................. $
Year ended December 31, 2021 ..................
Year ended December 31, 2020 ..................
Fair Value of Financial Instruments
679 $
623
522
637 $
263
293
481 $
207
192
835
679
623
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. At December 31, 2022 our short-term marketable securities reflected an unrealized loss of $1.8
million as a result of increasing market interest rates.
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
Computer hardware
Machinery and equipment
Building and leasehold improvements
Useful Life (in years)
3 – 5
3 – 10
The shorter of its useful life or lease term
70
Expenditures for maintenance and repairs are charged to operations when incurred, while additions and betterments
are capitalized. When assets are retired or disposed, the asset’s original cost and related accumulated depreciation are
eliminated from the accounts and any gain or loss is reflected in the statement of operations.
Valuation of Business Combinations
We assign the value of the consideration transferred to acquire a business to the tangible assets and identifiable
intangible assets acquired and liabilities assumed on the basis of their fair values at the date of acquisition. We assess the
fair value of assets, including intangible assets, using a variety of methods and are usually performed by an independent
appraiser who measures fair value from the perspective of a market participant.
Acquisitions have been accounted for using the acquisition method, and the acquired companies’ results have been
included in the accompanying consolidated financial statements from their respective dates of acquisition. Acquisition
transaction costs have been recorded in general and administrative expenses, and are expensed as incurred. Allocation of
the purchase price for acquisitions is based on estimates of the fair value of the net assets acquired and, for acquisitions
completed within the past year, is subject to adjustment upon finalization of the purchase price allocation.
Our acquisitions have historically been made at prices above the fair value of the acquired assets, resulting in
goodwill, due to expectations of synergies of combining the businesses. These synergies include use of our existing
commercial infrastructure to expand sales of the acquired businesses’ products, use of the commercial infrastructure of the
acquired businesses to cost-effectively expand sales of our products, and the elimination of redundant facilities, functions
and staffing.
Contingent Consideration
Contingent consideration for acquisitions is recognized at the date of acquisition, based on the fair value at that date,
and then re-measured periodically through adjustments to net income.
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 quantitative goodwill impairment
test. The “more likely than not” threshold is defined as having a likelihood of more than 50 percent. The quantitative
goodwill impairment test compares the fair value of a reporting unit with its carrying amount, including goodwill. If the fair
value of a reporting unit exceeds its carrying amount, goodwill of the reporting unit is considered not impaired. If the
carrying amount of a reporting unit exceeds its fair value, an impairment loss is recognized in an amount equal to that
excess, limited to the total amount of goodwill allocated to that reporting unit. We have determined that no goodwill
impairment charges were required for the years ended December 31, 2022, 2021 or 2020.
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.
71
Stock-based Compensation
We recognize, as expense, the estimated fair value of stock options to employees 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) and performance-based restricted stock units (PSUs) as additional forms
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. PSUs granted in December 2022 will vest based on achievement of operating income for
2023 against budgeted operating income as approved by our Board of Directors. The fair market value of the award is
determined based on the number of RSUs and PSUs 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 and PSUs are forfeited and canceled as of the date
that employment or service to the company terminates. RSUs and PSUs are settled in shares of our common stock upon
vesting. We typically repurchase common stock upon our employees’ vesting in RSUs and PSUs in order to cover any
minimum tax withholding liability as a result of the awards having vested. PSUs granted in December 2021 based on
achievement of operating income for 2022 against budgeted operating income as approved by our Board of Directors were
not achieved and therefore not awarded to the recipients. The Company reversed $0.6 million of stock-based compensation
expense in December 2022 as a result.
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 or changes in
approach, such as a change in settlement strategy in dealing with each matter. We record charges for anticipated losses in
connection with litigation and claims against us when we conclude a loss is probable and we can reasonably estimate the
loss. During the years ended December 31, 2022, 2021 and 2020, 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. 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.
72
We recognize, measure, present and disclose in our financial statements, uncertain tax positions that we have taken or
expect to take on a tax return. We recognize in our financial statements the impact of tax positions that meet a “more likely
than not” threshold, based on the technical merits of the position. The tax benefits recognized in the financial statements
from such a position are measured based on the largest benefit that has a greater than fifty percent likelihood of being
realized upon ultimate settlement.
Our policy is to classify interest and penalties related to unrecognized tax benefits as income tax expense.
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 and unrealized gains and losses on our marketable securities, 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, 2022, 2021 or 2020.
Accumulated other comprehensive loss consisted of foreign currency translation adjustment losses of $4.2 million
and $3.1 million as of December 31, 2022 and 2021, respectively, and unrealized losses on short-term marketable securities
of $1.8 million and $0.3 million as of December 31, 2022 and 2021, 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, 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.
73
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:
2022
Year ended December 31,
2021
(in thousands, except per share data)
2020
Basic:
Net income available for common stockholders ............................. $
20,636 $
26,907 $
21,220
Weighted average shares outstanding .............................................
21,975
21,157
20,246
Basic earnings per share ..................................................................... $
0.94 $
1.27 $
1.05
Diluted:
Net income available for common stockholders ............................. $
20,636 $
26,907 $
21,220
Weighted-average shares outstanding .............................................
Common stock equivalents, if dilutive ...........................................
21,975
196
21,157
318
20,246
233
Shares used in computing diluted earnings per common share ......
22,171
21,475
20,479
Diluted earnings per share .................................................................. $
0.93 $
1.25 $
1.04
Shares excluded in computing diluted earnings per share as those
shares would be anti-dilutive ..........................................................
293
10
483
Recent Accounting Pronouncements
From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (FASB)
or other standard setting bodies and are generally adopted by the Company as of a specified effective date. Unless
otherwise discussed, the Company believes that the impact of recently issued standards that are not yet effective will not
have a material impact on its financial position or results of operations upon adoption.
2. Acquisitions
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 14) of the fair value
hierarchy, due to the use of significant unobservable inputs to determine fair value. The fair value measurements were
calculated using unobservable inputs, primarily using the income approach, specifically the discounted cash flow method.
The amount and timing of future cash flows within our analysis was based on our due diligence models, most recent
operational budgets, long range strategic plans and other estimates.
74
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 the assets related to its business of 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 was to be held until
December 31, 2021 to cover any potential claims against LeMaitre or Artegraft, Inc. and subsequently was released to
Artegraft, Inc. by mutual consent of the parties.
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 (this milestone was not met and accordingly no payment was made);
$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 (this milestone was not met and accordingly no payment was made); 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 unit targets at the time of the closing of the acquisition, as well
as the time value of money until payment. This amount is remeasured each quarter during the earn-out period, with any
adjustments recorded in income from operations. As of December 31, 2022 the fair value of the liability is $0.1 million.
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....................................................................................................
Allocated
Fair Value
(in thousands)
3,859
1,789
1,140
(53)
39,056
27,115
Purchase price ......................................................................... $
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.
75
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
(in 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.
CardioCel and VascuCel Biologic Patches
On October 11, 2019 (the Closing Date), we entered into an asset purchase agreement (Admedus APA) to acquire the
biologic patch business assets and a related technology license from Admedus Ltd (now known as Anteris Technologies
Ltd) and various of its subsidiaries (collectively, Admedus). 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 Admedus
will manufacture and supply LeMaitre with inventory for a period of up to three years, unless extended in writing by both
parties. In August 2021, the term of this arrangement was extended through July 11, 2023, and in February 2023, it was
further extended through January 11, 2024.
Under the Admedus APA we agreed to pay Admedus 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 license. 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 Admedus. 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 payment
was made in October 2020. Additional contingent consideration was or may be payable as follows:
●
●
●
●
$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 (this
milestone was not met and accordingly no payment was made);
$0.5 million if, by the first anniversary of the Closing Date, Admedus 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); and
$2.0 million within 15 days following LeMaitre’s receipt of a CE mark under MDR regulations on all acquired
products (the Third Holdback Amount).
This contingent consideration of $7.5 million was initially valued in total at $2.0 million and is being re-measured
each reporting period until the payment requirement ends, with any adjustments reported in income from operations.
During the quarter ended September 30, 2021, the Company entered into an amendment to the Admedus APA. Under
the amendment, the Third Holdback Amount, less a deduction for certain expenses incurred by LeMaitre in order to achieve
CE mark certification, will be paid as follows: 75% within 15 days following LeMaitre’s receipt of a CE mark under MDR
regulations for CardioCel products, and 25% within 15 days following LeMaitre’s receipt of a CE mark under MDR
regulations for VascuCel products. During the quarter ended September 30, 2021 we recorded a reduction to the liability of
approximately $0.5 million, with the offset recorded in income from operations, to reflect our estimate of costs to be
deducted from the Third Holdback Amount in connection with this amendment. Additionally, during the quarter ended
December 31, 2022 we recorded a reduction to the liability of approximately $0.1 million, with the offset recorded in
income from operations.
76
3. Divestitures
On April 26, 2022, we committed to a plan to close our St. Etienne, France factory, which supported our LeMaitre
Cardial SAS (Cardial) business, in order to streamline manufacturing operations and reduce expenses. The Cardial business
consisted of the manufacture of polyester vascular grafts, valvulotomes, surgical glue and selected OEM devices. We
acquired the Cardial business in 2018.
On June 30, 2022 we ceased operations at the St. Etienne, France factory. The closure resulted in a restructuring
charge of $3.1 million for the year ended December 31, 2022. Charges primarily consisted of employment termination
costs, impairment of fixed assets and inventory, and third-party costs. We did not record additional expenses related to the
closure subsequent to June 30, 2022.
On October 10, 2022 we sold the St. Etienne, France building, building improvements, and land for $0.9 million less
closing costs of $0.1 million, resulting in a gain of approximately $0.1 million recorded for the three months ended
December 31, 2022.
4. Inventory and Other Deferred Costs
Inventory and other deferred costs consists of the following:
Raw materials ................................................ $
Work-in-process ............................................
Finished products ..........................................
Other deferred costs ......................................
December 31,
2022
December 31,
2021
(in thousands)
14,929 $
3,662
26,688
4,992
5,945
9,416
25,286
5,457
Total inventory and other deferred costs ....... $
50,271 $
46,104
We had inventory on consignment at customer sites of $1.5 million and $2.1 million at December 31, 2022 and 2021,
respectively.
In connection with our RestoreFlow allograft business, other deferred costs include costs incurred for the preservation
of human 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.
5. Property and Equipment
Property and equipment consists of the following:
Computer hardware ........................................................... $
Machinery and equipment .................................................
Building and leasehold improvements ..............................
As of December 31,
2021
2022
(in thousands)
5,689 $
22,104
15,232
5,667
18,439
15,884
Gross property and equipment ..........................................
Less accumulated depreciation ..........................................
43,025
(25,124)
39,990
(22,931)
Property and equipment, net.............................................. $
17,901 $
17,059
77
During the years ended December 31, 2022, 2021 and 2020 we wrote off fully depreciated assets with gross values of
$0.5 million, $0.1 million and $0.6 million, respectively.
Depreciation expense is as follows:
Depreciation expense ................................................. $
3,250 $
3,280 $
3,181
2022
Year ended December 31,
2021
(in thousands)
2020
6. Goodwill and Other Intangibles
Goodwill consists of the following:
As of December 31,
2021
2022
Balance at beginning of year ................................. $
Additions for acquisitions ..................................
Purchase accounting adjustments ......................
Effects of currency exchange ............................
65,945 $
-
-
-
65,945
-
-
-
Balance at end of year ........................................... $
65,945 $
65,945
Other intangibles consist of the following:
December 31, 2022
December 31, 2021
Gross
Carrying Accumulated Carrying Carrying Accumulated Carrying
Value
Amortization Value
Amortization Value
Gross
Value
Net
Net
Product technology and
intellectual property .................. $
29,549 $
13,319 $
16,230 $
29,549 $
10,473 $
19,076
(in thousands)
Trademarks, tradenames and
licenses......................................
Customer relationships .................
Other intangible assets..................
Total identifiable intangible
3,647
36,197
1,461
1,533
8,359
1,116
2,114
27,838
345
3,647
36,197
1,461
1,139
5,674
858
2,508
30,523
603
assets ......................................... $
70,854 $
24,327 $
46,527 $
70,854 $
18,144 $
52,710
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, 2022, is 10.1 years. Amortization expense is included in general and
administrative expense and is as follows:
Amortization expense ................................................ $
6,183 $
6,195 $
5,043
2022
Year ended December 31,
2021
(in thousands)
2020
78
Estimated amortization expense for each of the next five fiscal years, based upon the intangible assets at
December 31, 2022, is as follows:
2023
2024
Year ended December 31,
2025
(in thousands)
2026
2027
Amortization expense ....................... $
5,952 $
5,629 $
5,429 $
4,983 $
4,706
7. 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 that 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. During the year ended December 31, 2021, we made scheduled principal payments on the term loan of $1.0
million, repaid the loan in full, and terminated the credit agreement in accordance with its terms.
Under the terms of the agreement, the loans bore 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 was 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. Cash paid for interest during both of the years ended
December 31, 2021 and 2020 was $0.9 million.
We incurred debt issuance costs in connection with this credit arrangement of approximately $1.8 million. These
costs were allocated between the revolving line of credit and the term loans, 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 were being amortized into interest expense on a
straight-line basis as the result would not be materially different from using the interest method, over the five-year term of
the arrangement. This resulted in an effective interest rate of approximately 4.2%.
In November 2021, we terminated the credit agreement, including the revolving line of credit, as permitted under the
original agreement.
8. Accrued Expenses and Other Long-term Liabilities
Accrued expenses consist of the following:
December 31,
2022
December 31,
2021
Compensation and related taxes .......................................................... $
Accrued expenses ................................................................................
Accrued purchases ...............................................................................
Income and other taxes ........................................................................
Professional fees ..................................................................................
Other ....................................................................................................
(in thousands)
10,770 $
4,640
3,748
449
108
252
10,236
2,719
2,545
551
129
152
Total ................................................................................................. $
19,967 $
16,332
79
Other long-term liabilities consist of the following:
Acquisition-related liabilities .............................................................. $
Income taxes ........................................................................................
Other ....................................................................................................
(in thousands)
1,354 $
636
177
Total ................................................................................................. $
2,167 $
1,761
799
141
2,701
December 31,
2022
December 31,
2021
9. 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.
Our European operations are headquartered at a 21,410 square foot leased facility located in Sulzbach, Germany. In
June 2022, we increased our square footage by 4,940 (from 16,470) square feet and extended the lease through June 2031.
This lease contains a five-year renewal option. Additionally, in May 2022, we signed a new sales office/warehouse lease in
Seoul, Korea, which includes 2,300 square feet of office and warehouse space, and expires in April 2027. In June 2022, we
extended our Singapore lease by one-year to expire in June 2023.
We also lease a facility in Hereford, England which houses our United Kingdom sales and distribution business.
During the quarter ended June 30, 2021, we executed an expansion of the Hereford lease under terms substantially similar
to the original lease. 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 June 2021, we entered into a six-year
lease in Milan, Italy which houses a customer service and warehouse facility. This lease contains a six-year renewal option.
We also have smaller long-term leased sales, marketing and other facilities located in Arizona, Canada, Australia,
Singapore and China, and short-term leases in Japan, Spain and Illinois. In August 2022 the lease in Arizona was extended
for an additional three years through August 2025. The lease in China was extended for an additional two years through
August 2024, effective September 1, 2022. Our lease in Canada contains a five-year renewal option exercisable in February
2023. Effective March 2023, the Canada lease will be renewed for a term of three years, ending February 2026, with an
additional three year option thereafter. Our leases in Germany and Italy are subject to periodic rent increases based on
increases in the consumer price index as measured on an annual basis, 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. 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, 2022.
We also lease automobiles under operating leases in the United States as well as certain of our international
subsidiaries. The terms of these leases are generally three years, with older vehicles replaced by newer vehicles from time
to time. During the fiscal year 2021, we entered into a five-year lease for printing equipment.
We account for leases under the provisions of ASU No. 2016-02, subsequently amended by ASU 2018-11, . Under
this guidance, we are required to recognize the following for all leases (with the exception of short-term leases) at the
commencement date: a lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured
on a discounted basis; and a right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use
of, a specified asset for the lease term.
80
Our most significant judgement involved in determining the amounts to initially record as lease liabilities and right-
of-use assets upon initial adoption of this standard, and for leases entered into subsequently, was the selection of a discount
rate; because we had no debt as of the adoption of this standard, we had no incremental borrowing rate to reference. We
therefore derived 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 are substantially similar, and because we
believe our subsidiaries would be unable to obtain borrowings on their own without a commitment of parent company
support. In connection with the assumption of the Artegraft North Brunswick, New Jersey lease, we used LeMaitre’s
borrowing rate of 3.5% as of the acquisition date associated with debt incurred to finance the acquisition to value the lease.
Additional information with respect to our leases is as follows:
Year ended
December 31,
Year ended
December 31,
2022
(in thousands)
2021
(in thousands)
Lease cost
Operating lease cost ......................................................................................... $
Short-term lease cost ........................................................................................
Total lease cost ................................................................................................ $
2,203 $
632
2,835 $
2,275
458
2,733
Other information
Cash paid for amounts included in the measurement of operating lease
liabilities ....................................................................................................... $
2,878 $
2,859
Right-of-use assets obtained in exchange for new operating lease
liabilities ....................................................................................................... $
2,766 $
1,277
Weighted average remaining lease term - operating leases (in years) .............
Weighted average discount rate - operating leases ..........................................
7.1
4.93%
7.3
4.86%
At December 31, 2022, the minimum noncancelable operating lease rental commitments with initial or remaining
terms of more than one year are as follows:
Year ending December 31,
2023 ............................................................................................ $
2024 ............................................................................................
2025 ............................................................................................
2026 ............................................................................................
2027 ............................................................................................
Thereafter ............................................................................................
Adjustment to net present value as of December 31, 2022 .......................
2,795
2,720
2,615
2,519
2,423
6,975
(3,451)
Minimum noncancelable lease liability ..................................................... $
16,596
Purchase Commitments
As part of our normal course of business, we have commitments to purchase approximately $5.9 million of inventory
through 2023. These purchases are to be used in the normal course of business and do not represent excess commitments or
loss contracts.
81
10. Income Taxes
Income (loss) before income taxes is as follows:
2022
Year ended December 31,
2021
(in thousands)
2020
United States ......................................................... $
Foreign .................................................................
26,274 $
1,216
34,153 $
134
25,308
2,048
Total ..................................................................... $
27,490 $
34,287 $
27,356
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 ......................................................................
2022
Year ended December 31,
2021
(in thousands)
2020
5,063 $
938
1,035
5,024 $
990
1,287
4,594
806
1,064
7,036
7,301
6,464
(144)
(83)
45
(182)
63
(9)
25
79
(397)
(48)
117
(328)
Provision for income taxes ........................................ $
6,854 $
7,380 $
6,136
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, 2022, the gross amount of unrecognized tax benefits exclusive of
interest and penalties was $0.6 million, which may increase within the twelve months ending December 31, 2023. We
recognized a reduction of unrecognized tax benefits in 2022 due to the lapse of the applicable statute of limitations in
Australia. 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 2030. 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/adjustments for tax positions of current year ...............
Additions/adjustments 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 .......................... $
768 $
-
(57)
-
(99)
612 $
820 $
-
(52)
-
-
768 $
848
-
37
(65)
-
820
2022
2021
(in thousands)
2020
82
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,
2021
2022
(in thousands)
2,002 $
1,027
996
462
1,090
3,295
4,468
446
573
2,231
1,153
1,033
492
712
3,562
4,426
440
140
Total deferred tax assets .......................................................
14,359
14,189
Deferred tax liabilities:
Property and equipment .......................................................
Goodwill...............................................................................
Operating lease right-of-use assets .......................................
Foreign branch deferred offset .............................................
Other ....................................................................................
(1,473)
(5,610)
(3,066)
(742)
(164)
(1,713)
(4,825)
(3,355)
(843)
(213)
Total deferred tax liabilities .................................................
(11,055)
(10,949)
Net deferred tax assets before valuation allowance..............
3,304
3,240
Valuation allowance .............................................................
(1,628)
(1,744)
Net deferred tax liabiltity ........................................... $
1,676 $
1,496
Deferred tax classification
Long-term deferred tax asset ..................................... $
Long-term deferred tax liability ................................
1,745 $
(69)
1,566
(70)
Net long-term deferred tax asset ................................ $
1,676 $
1,496
In 2021, we decreased our valuation allowance by $0.1 million mainly attributable to Australian net operating loss
carry forwards and Massachusetts credit carryforwards. In 2022, we decreased our valuation allowance by $0.1 million
mainly attributable to Australian net operating loss carry forwards and Massachusetts credit carryforwards.
As of December 31, 2022, we have provided a valuation allowance of $1.6 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.
83
As of December 31, 2022, we have net operating loss carryforwards in Australia of $1.2 million that do not expire, in
France of $1.9 million that do not expire, in Spain of $0.7 million that do not expire, in Norway of $0.1 million that do not
expire, and in China of $0.4 million that expire in five years. We have a capital loss carryforward in Australia of $1.5
million that does not expire. We also have state tax credit carryforwards of approximately $1.6 million that are available to
reduce future tax liabilities, which begin to expire in 2030, 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:
2022
2021
2020
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 ............
Research & development tax credits ..........
Stock options ..............................................
Uncertain tax positions ...............................
Other permanent differences ......................
Other ..........................................................
21.0%
2.7%
4.0%
0.0%
(0.2%)
(0.2%)
0.0%
0.0%
(0.3%)
(1.8%)
(0.3%)
21.0%
2.7%
3.7%
0.2%
(0.1%)
(0.1%)
(0.4%)
(3.1%)
0.2%
(2.4%)
(0.2%)
21.0%
2.2%
1.1%
0.4%
1.4%
(0.2%)
(0.6%)
(2.3%)
0.3%
(0.6%)
(0.3%)
Effective tax rate ........................................
24.9%
21.5%
22.4%
We are not currently under income tax audit in any tax jurisdictions.
As of December 31, 2022, a summary of the tax years that remain subject to examination in our most significant tax
jurisdictions are:
United States ...................................................................................
Foreign ............................................................................................
2019 and forward
2015 and forward
Supplemental disclosures of cash flow information are as follows:
Cash paid for income taxes, net .......... $
8,343 $
10,147 $
4,470
2022
Year ended December 31,
2021
(in thousands)
2020
11. 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,
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.
84
Equity Offering
On July 16, 2021, we closed an offering of 1,000,000 shares of our common stock, $0.01 par value per share, at a
price to the public of $54.50 per share, less underwriting discounts. The net proceeds, after deducting the underwriting
discounts and other offering expenses, were approximately $51.0 million. We used a portion of the proceeds from the
offering to repay our outstanding debt. At the time of the offering we intended to use the remaining proceeds for general
corporate purposes, including working capital needs and capital expenditures, dividend payments, deferred payments
related to prior acquisitions, and the funding of future acquisitions.
On August 4, 2021, the underwriters purchased an additional 150,000 shares pursuant to an option granted to them in
connection with the offering described above. The net proceeds to the Company, after deducting underwriting discounts
and other offering expenses, were approximately $7.6 million. At the time of the stock sale we intended to use the proceeds
for general corporate purposes.
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, PSUs, 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, RSUs or PSUs 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 438,478 remain available for grant as
of December 31, 2022.
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 .............. $
2022
2021
2020
1.06%
44.6%
3.9%
4.5
18.10 $
0.91%
46.0%
1.1%
4.6
17.64 $
1.02%
47.3%
0.3%
4.9
13.24
85
A summary of option activity as of December 31, 2022 and for the three years then ended is presented below:
Weighted
Average
Exercise
Price
Number of
Shares
Weighted
Average
Remaining Aggregate
Intrinsic
Value
(in thousands)
Contractual
Term
(in years)
Balance outstanding at December 31, 2019 .................
1,047,094 $
28.22
4.31 $
13,367
Granted .........................................................................
Exercised ......................................................................
Canceled / Expired .......................................................
222,110 $
(331,958) $
(5,406) $
36.67
17.99
27.49
$
5,413
Balance outstanding at December 31, 2020 .................
931,840 $
28.22
4.49 $
11,442
Granted .........................................................................
Exercised ......................................................................
Canceled / Expired .......................................................
151,161 $
(217,121) $
(19,126) $
48.60
20.95
23.18
$
6,975
Balance outstanding at December 31, 2021 .................
846,754 $
33.83
4.50 $
13,888
Granted .........................................................................
Exercised ......................................................................
Canceled / Expired .......................................................
159,275 $
(133,963) $
(12,091) $
47.21
25.80
35.53
$
3,021
Balance outstanding at December 31, 2022 .................
859,975 $
37.53
4.35 $
7,878
Exercisable at:
December 31, 2020 ......................................................
December 31, 2021 ......................................................
December 31, 2022 ......................................................
Expected to vest at:
December 31, 2020 ......................................................
December 31, 2021 ......................................................
December 31, 2022 ......................................................
274,411 $
301,692 $
369,593 $
657,429 $
545,062 $
490,382 $
23.08
27.40
32.16
30.37
37.38
41.59
3.50 $
3.30 $
3.17 $
4.93
5.16
5.23
4,781
6,886
5,223
Cash received from stock options exercised during the years ended December 31, 2022, 2021 and 2020 was $3.5
million, $4.5 million and $6.0 million, respectively.
Restricted Stock Units and Performance-based Restricted Stock Units
The fair value of restricted stock unit awards with time-based vesting is based on the intrinsic value of the awards at
the date of grant.
We also issue restricted stock unit awards with vesting based on performance conditions. Performance-based
restricted stock units awarded will vest based on our achievement of operating income relative to our target operating
income. For restricted stock unit awards that include vesting based on performance conditions, the fair values are based on
the intrinsic values of the awards at the date of grant.
86
A summary of our restricted stock unit activity as of December 31, 2022 and for the three years then ended is
presented below:
Weighted
Average
Grant Date
Fair Value
Number
of Shares
Balance outstanding at December 31, 2019 ...........................................
188,681 $
Granted ...................................................................................................
Vested .....................................................................................................
Canceled .................................................................................................
46,146 $
(50,669) $
(37,143) $
Balance outstanding at December 31, 2020 ...........................................
147,015 $
Granted ...................................................................................................
Vested .....................................................................................................
Canceled .................................................................................................
48,298 $
(51,414) $
(10,068) $
26.14
36.86
22.76
27.88
30.24
48.65
26.32
30.70
Balance outstanding at December 31, 2021 ...........................................
133,831 $
38.26
Granted ...................................................................................................
Vested .....................................................................................................
Canceled .................................................................................................
51,031 $
(45,489) $
(6,229) $
47.11
35.75
40.79
Balance outstanding at December 31, 2022 ...........................................
133,144 $
42.38
A summary of our performance-based restricted stock unit activity as of December 31, 2022 and for the two years
then ended is presented below:
Weighted
Average
Grant Date
Fair Value
Number
of Shares
Balance outstanding at December 31, 2020 ....................................
- $
Granted ............................................................................................
Vested ..............................................................................................
Canceled ..........................................................................................
31,181 $
- $
- $
Balance outstanding at December 31, 2021 ....................................
31,181 $
Granted ............................................................................................
Vested ..............................................................................................
Canceled ..........................................................................................
28,830 $
- $
(31,538) $
Balance outstanding at December 31, 2022 ....................................
28,473 $
-
48.60
-
-
48.60
47.13
-
48.53
47.19
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 2022, 2021 and 2020 were $2.1
million, $2.5 million, and $1.8 million, respectively.
87
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:
2022
2021
2020
Shares of common stock repurchased for net settlement of
equity awards ............................................................................
Average per share repurchase price .............................................. $
Aggregate purchase price (in thousands) ...................................... $
13,690
46.90 $
642 $
16,333
49.10 $
802 $
16,537
34.47
570
Stock-based Compensation
The components of stock-based compensation expense included in the consolidated statements of operations are as
follows:
2022
2021
(in thousands)
2020
Stock option awards ............................................................... $
Restricted stock units .............................................................
Performance-based restricted stock units ...............................
2,487 $
1,654
32
2,199 $
1,247
33
Total stock-based compensation.................... $
4,173 $
3,479 $
Stock-based compensation is included in our statements of operations as follows:
2022
2021
(in thousands)
2020
Cost of sales ........................................................................... $
Sales and marketing ...............................................................
General and administrative .....................................................
Research and development .....................................................
494 $
771
2,500
408
407 $
527
2,185
360
Total stock-based compensation.................... $
4,173 $
3,479 $
1,938
1,084
-
3,022
333
516
1,883
290
3,022
We expect to record the unamortized portion of share-based compensation expense of $14.0 million for existing
stock options, RSUs and PSUs outstanding at December 31, 2022, over a weighted-average period of 2.1 years.
Stock Repurchase Plans
On February 21, 2023, our Board of Directors authorized the repurchase of up to $25.0 million of the Company’s
common stock through transactions on the open market, in privately negotiated purchases or otherwise until February 21,
2024. The repurchase program may be suspended or discontinued at any time. To date we have not made any repurchases
under this program.
88
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 2022
March 8, 2022
May 17, 2022
March 24, 2022 $
June 2, 2022 $
August 25, 2022 September 8, 2022 $
November 17, 2022 December 1, 2022 $
Fiscal Year 2021
March 9, 2021
May 19, 2021
March 25, 2021 $
June 3, 2021 $
August 26, 2021 September 9, 2021 $
November 19, 2021 December 2, 2021 $
0.125 $
0.125 $
0.125 $
0.125 $
0.110 $
0.110 $
0.110 $
0.110 $
2,743
2,745
2,750
2,750
2,262
2,267
2,401
2,405
On February 21, 2023, our Board of Directors approved a quarterly cash dividend on our common stock of $0.14 per
share payable on March 23, 2023, to stockholders of record at the close of business on March 9, 2023, which will total
approximately $3.1 million.
12. 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 $0.6 million, $0.5 million and $0.3 million for 2022, 2021 and 2020, respectively. A similar plan is offered
to our Canadian employees.
13. Segment and Enterprise-wide Disclosures
The FASB establishes standards for reporting information regarding operating segments in financial statements.
Operating segments are identified as components of an enterprise that engage in business activities for which separate,
discrete financial information is available and is regularly reviewed by the chief operating decision-maker in making
decisions on how to allocate resources and assess performance. We view our operations and manage our business as one
operating segment. No discrete operating information is prepared by us except for sales by product line and operations by
legal entity for local reporting purposes.
Most of our revenues are generated in the United States, Germany, and other European countries, Canada, the United
Kingdom and Japan, and substantially all of our assets are located in the United States, Germany and France. Net sales to
unaffiliated customers by country were as follows:
2022
Year ended December 31,
2021
(in thousands)
2020
United States .............................................................. $
Germany ....................................................................
Canada .......................................................................
Other countries ..........................................................
99,463 $
11,223
8,336
42,629
93,866 $
12,968
7,054
40,536
75,222
12,365
5,408
36,371
Net sales .................................................................... $
161,651 $
154,424 $
129,366
89
Long-term assets by country, including property and equipment, net and right-of-use leased assets were as follows:
As of December 31,
2021
2022
(in thousands)
United States ........................................................................ $
Germany ...............................................................................
France ...................................................................................
Other countries .....................................................................
29,042 $
2,462
15
2,016
28,402
781
1,038
1,909
Total long-term assets .......................................................... $
33,535 $
32,130
14. Fair Value Measurements
The fair value accounting guidance requires that assets and liabilities carried at fair value be classified and disclosed
in one of the following three categories:
● Level 1 — Quoted prices in active markets for identical assets or liabilities.
● Level 2 — Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar
assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that
are not active; or other inputs that are observable or can be corroborated by observable market data.
● Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the
fair value of the assets or liabilities. This includes certain pricing models, discounted cash flow methodologies
and similar techniques that use significant unobservable inputs.
Level 1 assets being measured at fair value on a recurring basis as of December 31, 2022 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, 2022.
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 required us to make potential additional
payments to Artegraft of up to $17.5 million depending on the achievement of certain unit sales 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 is being remeasured each quarter during the earn-out period, with any adjustments
recorded in income from operations. During the quarter ended December 31, 2022 we recorded a reduction to the liability
to reflect a change in our estimate of the likelihood of achieving the unit sales milestones.
During 2019, we recorded contingent liabilities associated with our acquisition of the Admedus biologic patch
business. 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 to us;
$2.0 million contingent on LeMaitre’s success in obtaining CE marks under MDR regulations on the acquired products,
$0.5 million contingent upon Admedus’ success in extending the shelf life of the acquired products as specified in the
agreement, 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 Admedus’ extending the
shelf life of the acquired products and achieving the revenue targets during the first 12 and 24 month periods following the
acquisition were not met, and the portion of the liabilities related to these items was adjusted through income from
operations. The agreement was amended in August 2021 such that the contingent payment of $2.0 million potentially due
upon LeMaitre Vascular’s success in obtaining CE marks under MDR regulations on the acquired products may be reduced
for certain costs incurred by LeMaitre in achieving the CE marks. During the quarter ended September 30, 2021 we
recorded a reduction to the liability of $0.5 million, with the offset recorded in income from operations, to reflect our
90
estimate of costs to be deducted from the contingent payment in connection with this amendment. Additionally, during the
quarter ended December 31, 2022 we recorded a reduction to the liability of approximately $0.1 million, with the offset
recorded in 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:
2022
Year ended December 31,
2021
(in thousands)
2020
Beginning balance ..................................................... $
Additions ...................................................................
Payments ...................................................................
Change in fair value included in earnings .................
1,492 $
-
-
(153)
2,240 $
-
-
(748)
1,764
406
-
70
Ending balance .......................................................... $
1,339 $
1,492 $
2,240
15. Accumulated Other Comprehensive Income (Loss)
2022
Year ended December 31,
2021
(in thousands)
2020
Beginning balance ..................................................... $
(3,435 ) $
(1,525) $
(4,007)
Other comprehensive income (loss) before
reclassifications ......................................................
(2,596 )
(1,910)
2,482
Amounts reclassified from accumulated other
comprehensive loss ................................................
-
-
-
Ending Balance .......................................................... $
(6,031 ) $
(3,435) $
(1,525)
Changes to our accumulated other comprehensive loss consisted primarily of foreign currency translation and
unrealized losses on short-term marketable securities for the years ended December 31, 2022, 2021 and 2020.
16. Quarterly Financial Data (unaudited)
Three months ended
2022
March 31
June 30
September 30 December 31
(in thousands, except per share data)
Total net sales ........................................ $
Gross profit ............................................
Income from operations .........................
Net income ............................................
Earnings per share
Basic .................................................. $
Diluted ............................................... $
39,561 $
25,962
7,928
6,038
0.28 $
0.27 $
42,108 $
27,810
5,784
3,515
0.16 $
0.16 $
39,028 $
25,070
6,150
5,456
0.25 $
0.25 $
40,954
26,054
6,967
5,627
0.26
0.25
2021
March 31
June 30
September 30 December 31
(in thousands, except per share data)
Three months ended
Total net sales ........................................ $
Gross profit ............................................
Income from operations .........................
Net income ............................................
Earnings per share .................................
Basic .................................................. $
Diluted ............................................... $
35,883 $
23,799
7,945
5,929
0.29 $
0.28 $
91
40,670 $
26,761
11,106
8,299
0.40 $
0.40 $
38,368 $
24,866
9,073
6,504
0.30 $
0.30 $
39,503
25,956
8,301
6,175
0.28
0.28
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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
JOSEPH P. PELLEGRINO, JR.
Chief Financial Officer & Secretary
LeMaitre Vascular, Inc.
Director since 2016
DAVID B. ROBERTS
President
LeMaitre Vascular, Inc.
Director since 2001
BRIDGET A. ROSS3
Chief Executive Officer
ChroniSense Medical, Ltd.
Director since 2020
JOHN A. ROUSH1, 2
Operating Executive Advisor
ACON Investments, LLC
Director since 2014
MARTHA SHADAN
Retired President & Chief Executive Officer
Miach Orthopaedics
Director since 2022
1 Member of the Audit Committee
2 Member of the Compensation Committee
3 Member of the Nominating and Corporate
Governance Committee
STOCKHOLDER INFORMATION
PRICE RANGE OF COMMON STOCK
Our common stock trades on the Nasdaq Global
Market under the symbol “LMAT”. The following
table sets forth the high and low closing sale prices
of our common stock for the periods indicated.
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.
PRICE RANGE
Computershare Investor Services
150 Royall Street
Canton, MA 02021
2021 HIGH
LOW
First Quarter
$48.78
$40.19
Second Quarter
$63.33
$47.74
Third Quarter
$60.57
$53.09
Fourth Quarter
$56.25
$46.66
2022 HIGH
LOW
First Quarter
$51.50
$40.48
Second Quarter
$47.85
$39.05
Third Quarter
$55.99
$45.29
Fourth Quarter
$52.25
$41.94
INDEPENDENT AUDITORS
Grant Thornton LLP
Boston, MA
Auditors since 2015
ANNUAL MEETING
The annual meeting of stockholders will take
place on Thursday, June 1, 2023, 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
DAVID B. ROBERTS
President
HELEN GOULDING
DANIEL J. MUMFORD
Director, Sales - Northern Europe
Director, Human Resources
ANDREW HODGKINSON
JONATHAN W. NGAU
SVP, Clinical, Regulatory & Quality Affairs
Vice President, Information Technology
JOSEPH P. PELLEGRINO, JR.
CHANCE KRIESEL
JACOB PETERSEN
Chief Financial Officer
TRENT G. KAMKE
Vice President, Sales, The Americas
Vice President, Asia-Pacific
ROLI KUMAR-CHOUDHURY
JAMES RUSSELL
Senior Vice President, Operations
Vice President, Quality Affairs
Vice President, Production & Supply Chain
KIMBERLY L. CIESLAK
Vice President, Marketing
RYAN H. CONNELLY
INA LEININGER
KATHRYN TEBBE
Director, Sales - Central Europe
Senior Director, Financial Reporting
STÉPHANE MAIER
XIANG ZHANG
Vice President, Research & Development
Senior Vice President, EMEA Operations
Vice President, Regulatory Affairs
GIOVANNELLA DEIURE
CHRISTOPHER D. MINNETT
Vice President, Sales - Southern Europe
Country Manager, Canada
2022 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 Singapore, Pte. Ltd.
138 Robinson Road
#12-02 Oxley Tower
068906, Singapore
Tel: +65 6813 0281
www.lemaitre.com