lmat20210930_10q.htm
0001158895 LEMAITRE VASCULAR INC false --12-31 Q3 2021 632 623 0.01 0.01 3,000,000 3,000,000 0 0 0.01 0.01 37,000,000 37,000,000 23,384,129 22,061,554 1,546,036 1,538,572 2017 2018 2019 2020 2014 2015 2016 2017 2018 2019 2020 2 5 5 5 6 6 5 3 5 0 0 October 26, 2021 December 2, 2021 0 00011588952021-01-012021-09-30 xbrli:shares 00011588952021-10-27 thunderdome:item iso4217:USD 00011588952021-09-30 00011588952020-12-31 iso4217:USDxbrli:shares 00011588952021-07-012021-09-30 00011588952020-07-012020-09-30 00011588952020-01-012020-09-30 0001158895us-gaap:CommonStockMember2020-12-31 0001158895us-gaap:AdditionalPaidInCapitalMember2020-12-31 0001158895us-gaap:RetainedEarningsMember2020-12-31 0001158895us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-12-31 0001158895us-gaap:TreasuryStockMember2020-12-31 0001158895us-gaap:CommonStockMember2021-01-012021-03-31 0001158895us-gaap:AdditionalPaidInCapitalMember2021-01-012021-03-31 0001158895us-gaap:RetainedEarningsMember2021-01-012021-03-31 0001158895us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-01-012021-03-31 0001158895us-gaap:TreasuryStockMember2021-01-012021-03-31 00011588952021-01-012021-03-31 0001158895us-gaap:CommonStockMember2021-03-31 0001158895us-gaap:AdditionalPaidInCapitalMember2021-03-31 0001158895us-gaap:RetainedEarningsMember2021-03-31 0001158895us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-03-31 0001158895us-gaap:TreasuryStockMember2021-03-31 00011588952021-03-31 0001158895us-gaap:CommonStockMember2021-04-012021-06-30 0001158895us-gaap:AdditionalPaidInCapitalMember2021-04-012021-06-30 0001158895us-gaap:RetainedEarningsMember2021-04-012021-06-30 0001158895us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-04-012021-06-30 0001158895us-gaap:TreasuryStockMember2021-04-012021-06-30 00011588952021-04-012021-06-30 0001158895us-gaap:CommonStockMember2021-06-30 0001158895us-gaap:AdditionalPaidInCapitalMember2021-06-30 0001158895us-gaap:RetainedEarningsMember2021-06-30 0001158895us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-06-30 0001158895us-gaap:TreasuryStockMember2021-06-30 00011588952021-06-30 0001158895us-gaap:CommonStockMember2021-07-012021-09-30 0001158895us-gaap:AdditionalPaidInCapitalMember2021-07-012021-09-30 0001158895us-gaap:RetainedEarningsMember2021-07-012021-09-30 0001158895us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-07-012021-09-30 0001158895us-gaap:TreasuryStockMember2021-07-012021-09-30 0001158895us-gaap:CommonStockMember2021-09-30 0001158895us-gaap:AdditionalPaidInCapitalMember2021-09-30 0001158895us-gaap:RetainedEarningsMember2021-09-30 0001158895us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-09-30 0001158895us-gaap:TreasuryStockMember2021-09-30 0001158895us-gaap:CommonStockMember2019-12-31 0001158895us-gaap:AdditionalPaidInCapitalMember2019-12-31 0001158895us-gaap:RetainedEarningsMember2019-12-31 0001158895us-gaap:AccumulatedOtherComprehensiveIncomeMember2019-12-31 0001158895us-gaap:TreasuryStockMember2019-12-31 00011588952019-12-31 0001158895us-gaap:CommonStockMember2020-01-012020-03-31 0001158895us-gaap:AdditionalPaidInCapitalMember2020-01-012020-03-31 0001158895us-gaap:RetainedEarningsMember2020-01-012020-03-31 0001158895us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-01-012020-03-31 0001158895us-gaap:TreasuryStockMember2020-01-012020-03-31 00011588952020-01-012020-03-31 0001158895us-gaap:CommonStockMember2020-03-31 0001158895us-gaap:AdditionalPaidInCapitalMember2020-03-31 0001158895us-gaap:RetainedEarningsMember2020-03-31 0001158895us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-03-31 0001158895us-gaap:TreasuryStockMember2020-03-31 00011588952020-03-31 0001158895us-gaap:CommonStockMember2020-04-012020-06-30 0001158895us-gaap:AdditionalPaidInCapitalMember2020-04-012020-06-30 0001158895us-gaap:RetainedEarningsMember2020-04-012020-06-30 0001158895us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-04-012020-06-30 0001158895us-gaap:TreasuryStockMember2020-04-012020-06-30 00011588952020-04-012020-06-30 0001158895us-gaap:CommonStockMember2020-06-30 0001158895us-gaap:AdditionalPaidInCapitalMember2020-06-30 0001158895us-gaap:RetainedEarningsMember2020-06-30 0001158895us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-06-30 0001158895us-gaap:TreasuryStockMember2020-06-30 00011588952020-06-30 0001158895us-gaap:CommonStockMember2020-07-012020-09-30 0001158895us-gaap:AdditionalPaidInCapitalMember2020-07-012020-09-30 0001158895us-gaap:RetainedEarningsMember2020-07-012020-09-30 0001158895us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-07-012020-09-30 0001158895us-gaap:TreasuryStockMember2020-07-012020-09-30 0001158895us-gaap:CommonStockMember2020-09-30 0001158895us-gaap:AdditionalPaidInCapitalMember2020-09-30 0001158895us-gaap:RetainedEarningsMember2020-09-30 0001158895us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-09-30 0001158895us-gaap:TreasuryStockMember2020-09-30 00011588952020-09-30 0001158895srt:AmericasMember2021-07-012021-09-30 0001158895srt:AmericasMember2020-07-012020-09-30 0001158895srt:AmericasMember2021-01-012021-09-30 0001158895srt:AmericasMember2020-01-012020-09-30 0001158895us-gaap:EMEAMember2021-07-012021-09-30 0001158895us-gaap:EMEAMember2020-07-012020-09-30 0001158895us-gaap:EMEAMember2021-01-012021-09-30 0001158895us-gaap:EMEAMember2020-01-012020-09-30 0001158895srt:AsiaPacificMember2021-07-012021-09-30 0001158895srt:AsiaPacificMember2020-07-012020-09-30 0001158895srt:AsiaPacificMember2021-01-012021-09-30 0001158895srt:AsiaPacificMember2020-01-012020-09-30 utr:D 0001158895srt:MinimumMember2021-01-012021-09-30 0001158895srt:MaximumMember2021-01-012021-09-30 0001158895us-gaap:DomesticCountryMemberus-gaap:InternalRevenueServiceIRSMember2021-01-012021-09-30 0001158895us-gaap:ForeignCountryMember2021-01-012021-09-30 0001158895lmat:ArtegraftIncMembersrt:MaximumMember2020-06-222020-06-22 0001158895lmat:ArtegraftIncMember2020-06-222020-06-22 0001158895lmat:ArtegraftIncMemberlmat:FirstEarnoutMember2020-06-22 xbrli:pure 0001158895lmat:ArtegraftIncMemberlmat:SecondEarnoutMember2020-06-22 0001158895lmat:ArtegraftIncMemberlmat:ThirdEarnoutMember2020-06-22 0001158895lmat:ArtegraftIncMemberlmat:CatchupPaymentMember2020-06-22 0001158895lmat:ArtegraftIncMember2020-06-22 utr:Y 0001158895lmat:ArtegraftIncMemberus-gaap:CustomerRelationshipsMember2020-06-22 0001158895lmat:ArtegraftIncMemberus-gaap:CustomerRelationshipsMember2020-06-222020-06-22 0001158895lmat:ArtegraftIncMemberus-gaap:IntellectualPropertyMember2020-06-22 0001158895lmat:ArtegraftIncMemberus-gaap:IntellectualPropertyMember2020-06-222020-06-22 0001158895lmat:ArtegraftIncMemberus-gaap:NoncompeteAgreementsMember2020-06-22 0001158895lmat:ArtegraftIncMemberus-gaap:NoncompeteAgreementsMember2020-06-222020-06-22 0001158895lmat:ArtegraftIncMemberus-gaap:TradeNamesMember2020-06-22 0001158895lmat:ArtegraftIncMemberus-gaap:TradeNamesMember2020-06-222020-06-22 0001158895lmat:CardioCelAndVascuCelBiologicPatchesMemberlmat:BiologicalPatchBusinessAssetsMembersrt:MaximumMember2019-10-112019-10-11 0001158895lmat:CardioCelAndVascuCelBiologicPatchesMemberlmat:TechnologyLicensesMember2019-10-112019-10-11 0001158895lmat:CardioCelAndVascuCelBiologicPatchesMember2019-10-112019-10-11 0001158895lmat:CardioCelAndVascuCelBiologicPatchesMemberlmat:AchievingAuditedFinancialStatementsOfAcquiredBusinessMember2019-10-112019-10-11 0001158895lmat:CardioCelAndVascuCelBiologicPatchesMemberlmat:FirstHoldbackMember2019-10-11 0001158895lmat:CardioCelAndVascuCelBiologicPatchesMemberlmat:RevenuesExceedingTwentyMillionInTheFirstTwelveMonthPeriodAfterClosingDateMember2019-10-11 0001158895lmat:CardioCelAndVascuCelBiologicPatchesMemberlmat:RevenuesExceedingFifteenMillionInTheFirstTwelveMonthPeriodAfterClosingDateMember2019-10-11 0001158895lmat:CardioCelAndVascuCelBiologicPatchesMemberlmat:RevenuesExceedingThirtyMillionInTheSecondTwelveMonthPeriodAfterClosingDateMember2019-10-11 0001158895lmat:CardioCelAndVascuCelBiologicPatchesMemberlmat:RevenuesExceedingTwentyTwoAndAHalfMillionInTheFirstTwelveMonthPeriodAfterClosingDateMember2019-10-11 0001158895lmat:CardioCelAndVascuCelBiologicPatchesMemberlmat:ExtensionOfProductShelfLifeFrom36MonthsTo60MonthsInTheFirstAnniversaryOfClosingDateMember2019-10-11 0001158895lmat:CardioCelAndVascuCelBiologicPatchesMemberlmat:ThirdHoldbackMember2019-10-11 0001158895lmat:CardioCelAndVascuCelBiologicPatchesMember2019-10-11 0001158895lmat:CardioCelAndVascuCelBiologicPatchesMember2021-03-31 0001158895lmat:CardioCelAndVascuCelBiologicPatchesMemberlmat:ThirdHoldbackMemberlmat:CardiocelProductMember2021-09-30 0001158895lmat:CardioCelAndVascuCelBiologicPatchesMemberlmat:ThirdHoldbackMemberlmat:VascucelProductMember2021-09-30 0001158895lmat:CardioCelAndVascuCelBiologicPatchesMemberlmat:ThirdHoldbackMember2021-07-012021-09-30 0001158895lmat:CardioCelAndVascuCelBiologicPatchesMember2020-07-012020-09-30 0001158895lmat:CardioCelAndVascuCelBiologicPatchesMemberus-gaap:CustomerRelationshipsMember2019-10-11 0001158895lmat:CardioCelAndVascuCelBiologicPatchesMemberus-gaap:CustomerRelationshipsMember2019-10-112019-10-11 0001158895lmat:CardioCelAndVascuCelBiologicPatchesMemberus-gaap:IntellectualPropertyMember2019-10-11 0001158895lmat:CardioCelAndVascuCelBiologicPatchesMemberus-gaap:IntellectualPropertyMember2019-10-112019-10-11 0001158895lmat:CardioCelAndVascuCelBiologicPatchesMemberus-gaap:NoncompeteAgreementsMember2019-10-11 0001158895lmat:CardioCelAndVascuCelBiologicPatchesMemberus-gaap:NoncompeteAgreementsMember2019-10-112019-10-11 0001158895lmat:CardioCelAndVascuCelBiologicPatchesMemberus-gaap:TradeNamesMember2019-10-11 0001158895lmat:CardioCelAndVascuCelBiologicPatchesMemberus-gaap:TradeNamesMember2019-10-112019-10-11 0001158895lmat:CardioCelAndVascuCelBiologicPatchesMember2021-01-012021-09-30 0001158895lmat:TruinciseValveCutterMember2019-07-122019-07-12 0001158895lmat:TruinciseValveCutterMember2019-07-12 0001158895lmat:AppliedMedicalMemberus-gaap:CustomerRelationshipsMember2018-09-20 0001158895lmat:AppliedMedicalMemberus-gaap:CustomerRelationshipsMember2018-09-202018-09-20 0001158895lmat:AppliedMedicalMemberus-gaap:IntellectualPropertyMember2018-09-20 0001158895lmat:AppliedMedicalMemberus-gaap:IntellectualPropertyMember2018-09-202018-09-20 0001158895lmat:AppliedMedicalMemberus-gaap:NoncompeteAgreementsMember2018-09-20 0001158895lmat:AppliedMedicalMemberus-gaap:NoncompeteAgreementsMember2018-09-202018-09-20 0001158895lmat:AppliedMedicalMemberus-gaap:TradeNamesMember2018-09-20 0001158895lmat:AppliedMedicalMemberus-gaap:TradeNamesMember2018-09-202018-09-20 0001158895lmat:AppliedMedicalMember2018-09-20 0001158895lmat:ProductTechnologyAndIntellectualPropertyMember2021-09-30 0001158895lmat:ProductTechnologyAndIntellectualPropertyMember2020-12-31 0001158895lmat:TrademarksTradenamesAndLicensesMember2021-09-30 0001158895lmat:TrademarksTradenamesAndLicensesMember2020-12-31 0001158895us-gaap:CustomerRelationshipsMember2021-09-30 0001158895us-gaap:CustomerRelationshipsMember2020-12-31 0001158895us-gaap:OtherIntangibleAssetsMember2021-09-30 0001158895us-gaap:OtherIntangibleAssetsMember2020-12-31 0001158895srt:WeightedAverageMember2021-01-012021-09-30 0001158895lmat:SeniorSecuredCreditFacilityMember2020-06-22 0001158895us-gaap:RevolvingCreditFacilityMemberlmat:SeniorSecuredCreditFacilityMember2020-06-22 0001158895lmat:SeniorSecuredCreditFacilityMemberlmat:TermLoanMember2020-06-22 0001158895lmat:SeniorSecuredCreditFacilityMemberlmat:TermLoanMember2020-06-222020-06-22 0001158895lmat:SeniorSecuredCreditFacilityMemberlmat:TermLoanMember2020-01-012020-12-31 0001158895lmat:SeniorSecuredCreditFacilityMemberlmat:TermLoanMember2021-01-012021-09-30 0001158895lmat:SeniorSecuredCreditFacilityMember2021-01-012021-09-30 0001158895lmat:SeniorSecuredCreditFacilityMemberlmat:TermLoanMembersrt:MinimumMemberus-gaap:BaseRateMember2020-06-222020-06-22 0001158895lmat:SeniorSecuredCreditFacilityMemberlmat:TermLoanMembersrt:MaximumMemberus-gaap:BaseRateMember2020-06-222020-06-22 0001158895lmat:SeniorSecuredCreditFacilityMemberlmat:TermLoanMembersrt:MinimumMemberus-gaap:EurodollarMember2020-06-222020-06-22 0001158895lmat:SeniorSecuredCreditFacilityMemberlmat:TermLoanMembersrt:MaximumMemberus-gaap:EurodollarMember2020-06-222020-06-22 0001158895lmat:SeniorSecuredCreditFacilityMemberlmat:TermLoanMemberus-gaap:FederalFundsEffectiveSwapRateMember2020-06-222020-06-22 0001158895us-gaap:OtherAssetsMemberus-gaap:RevolvingCreditFacilityMemberlmat:SeniorSecuredCreditFacilityMember2020-06-22 0001158895lmat:SeniorSecuredCreditFacilityMember2020-12-31 0001158895lmat:SeniorSecuredCreditFacilityMemberlmat:TermLoanMember2021-07-012021-09-30 0001158895lmat:SeniorSecuredCreditFacilityMemberlmat:TermLoanMembersrt:MinimumMember2020-06-222020-06-22 0001158895us-gaap:RevolvingCreditFacilityMemberlmat:SeniorSecuredCreditFacilityMember2020-06-222020-06-22 0001158895lmat:SeniorSecuredCreditFacilityMemberlmat:TermLoanMember2021-09-30 utr:sqft 0001158895lmat:PrincipalWorldwideExecutiveDistributionAndManufacturingOperationsFacilitiesMemberlmat:Massachusetts1Member2021-09-30 0001158895lmat:InternationalOperationsHeadquarterFacilityMembercountry:DE2021-09-30 0001158895lmat:ArtegraftIncMemberlmat:NorthBrunswickNewJerseyMember2021-09-30 0001158895lmat:CustomerServiceAndWarehouseFacilityMembercountry:IT2021-06-30 0001158895country:CA2021-06-30 0001158895lmat:LeasedAutomobilesMember2021-06-30 0001158895lmat:LeasedPrintingEquipmentMember2021-06-30 0001158895country:US2021-07-012021-09-30 0001158895country:US2020-07-012020-09-30 0001158895country:US2021-01-012021-09-30 0001158895country:US2020-01-012020-09-30 0001158895country:DE2021-07-012021-09-30 0001158895country:DE2020-07-012020-09-30 0001158895country:DE2021-01-012021-09-30 0001158895country:DE2020-01-012020-09-30 0001158895lmat:OtherCountriesMember2021-07-012021-09-30 0001158895lmat:OtherCountriesMember2020-07-012020-09-30 0001158895lmat:OtherCountriesMember2021-01-012021-09-30 0001158895lmat:OtherCountriesMember2020-01-012020-09-30 0001158895us-gaap:EmployeeStockOptionMember2021-07-012021-09-30 0001158895us-gaap:EmployeeStockOptionMember2020-07-012020-09-30 0001158895us-gaap:EmployeeStockOptionMember2021-01-012021-09-30 0001158895us-gaap:EmployeeStockOptionMember2020-01-012020-09-30 0001158895us-gaap:RestrictedStockUnitsRSUMember2021-07-012021-09-30 0001158895us-gaap:RestrictedStockUnitsRSUMember2020-07-012020-09-30 0001158895us-gaap:RestrictedStockUnitsRSUMember2021-01-012021-09-30 0001158895us-gaap:RestrictedStockUnitsRSUMember2020-01-012020-09-30 0001158895us-gaap:CostOfSalesMember2021-07-012021-09-30 0001158895us-gaap:CostOfSalesMember2020-07-012020-09-30 0001158895us-gaap:CostOfSalesMember2021-01-012021-09-30 0001158895us-gaap:CostOfSalesMember2020-01-012020-09-30 0001158895us-gaap:SellingAndMarketingExpenseMember2021-07-012021-09-30 0001158895us-gaap:SellingAndMarketingExpenseMember2020-07-012020-09-30 0001158895us-gaap:SellingAndMarketingExpenseMember2021-01-012021-09-30 0001158895us-gaap:SellingAndMarketingExpenseMember2020-01-012020-09-30 0001158895us-gaap:GeneralAndAdministrativeExpenseMember2021-07-012021-09-30 0001158895us-gaap:GeneralAndAdministrativeExpenseMember2020-07-012020-09-30 0001158895us-gaap:GeneralAndAdministrativeExpenseMember2021-01-012021-09-30 0001158895us-gaap:GeneralAndAdministrativeExpenseMember2020-01-012020-09-30 0001158895us-gaap:ResearchAndDevelopmentExpenseMember2021-07-012021-09-30 0001158895us-gaap:ResearchAndDevelopmentExpenseMember2020-07-012020-09-30 0001158895us-gaap:ResearchAndDevelopmentExpenseMember2021-01-012021-09-30 0001158895us-gaap:ResearchAndDevelopmentExpenseMember2020-01-012020-09-30 00011588952021-07-162021-07-16 00011588952021-07-16 0001158895lmat:UnderwritersMember2021-08-042021-08-04 0001158895lmat:StockRepurchaseProgramMemberus-gaap:CommonStockMember2021-02-23 0001158895lmat:StockRepurchaseProgramMemberus-gaap:CommonStockMember2021-01-012021-09-30 0001158895lmat:QuarterlyDividends1Member2021-01-012021-09-30 0001158895lmat:QuarterlyDividends1Member2021-09-30 0001158895lmat:QuarterlyDividends2Member2021-01-012021-09-30 0001158895lmat:QuarterlyDividends2Member2021-09-30 0001158895lmat:QuarterlyDividends3Member2021-01-012021-09-30 0001158895lmat:QuarterlyDividends3Member2021-09-30 0001158895lmat:QuarterlyDividends4Member2020-01-012020-12-31 0001158895lmat:QuarterlyDividends4Member2020-12-31 0001158895lmat:QuarterlyDividends5Member2020-01-012020-12-31 0001158895lmat:QuarterlyDividends5Member2020-12-31 0001158895lmat:QuarterlyDividends6Member2020-01-012020-12-31 0001158895lmat:QuarterlyDividends6Member2020-12-31 0001158895lmat:QuarterlyDividends7Member2020-01-012020-12-31 0001158895lmat:QuarterlyDividends7Member2020-12-31 0001158895us-gaap:SubsequentEventMember2021-10-262021-10-26 0001158895us-gaap:SubsequentEventMember2021-10-26 0001158895us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMember2021-09-30 0001158895lmat:ArtegraftIncMember2020-12-31 0001158895lmat:CardioCelAndVascuCelBiologicPatchesMember2019-12-31 0001158895lmat:CardioCelAndVascuCelBiologicPatchesMemberlmat:AuditedCarveOutFinancialStatementsOfTheAcquiredBusinessMember2019-12-31 0001158895lmat:CardioCelAndVascuCelBiologicPatchesMemberlmat:ThirdHoldbackMember2019-12-31 0001158895lmat:CardioCelAndVascuCelBiologicPatchesMemberlmat:ExtensionOfProductShelfLifeFrom36MonthsTo60MonthsInTheFirstAnniversaryOfClosingDateMember2019-12-31 0001158895lmat:CardioCelAndVascuCelBiologicPatchesMemberlmat:AchievementOfSpecifiedLevelsOfRevenuesMember2019-12-31 0001158895lmat:CardioCelAndVascuCelBiologicPatchesMemberus-gaap:FairValueInputsLevel3Member2019-10-11 0001158895us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-01-012021-09-30 0001158895us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-01-012020-09-30
 

 

Table of Contents



UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

   
 

FORM 10-Q

 
   

 

(Mark One)

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

 

For the quarterly period ended September 30, 2021

 

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

04-2825458

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

 

  

63 Second Avenue, Burlington, Massachusetts

01803

(Address of principal executive offices)

(Zip Code)

 

 

(781) 221-2266

 

(Registrants telephone number, including area code)

   

 

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 an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth Company “in Rule 12b-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 check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  ☒

 

Securities registered pursuant to Section 12(b) of the Exchange Act:

 

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common stock, $0.01 par value per share

LMAT 

The Nasdaq Global Market

 

 

The registrant had 21,838,093 shares of common stock, $.01 par value per share, outstanding as of October 27, 2021.

 

 

 

 

 

LEMAITRE VASCULAR

FORM 10-Q

TABLE OF CONTENTS

 

       
     

Page

Part I.

Financial Information:

 
       
 

Item 1.

Financial Statements

 
       
   

Consolidated Balance Sheets as of September 30, 2021 (unaudited) and December 31, 2020

3

       
   

Unaudited Consolidated Statements of Operations for the three-month and nine-month periods ended September 30, 2021 and 2020

4

       
   

Unaudited Consolidated Statements of Comprehensive Income for the three-month and nine-month periods ended September 30, 2021 and 2020

5

       
   

Unaudited Consolidated Statements of Stockholders Equity for the three-month and nine-month periods ended September 30, 2021 and 2020

6

       
   

Unaudited Consolidated Statements of Cash Flows for the nine-month periods ended September 30, 2021 and 2021

8

       
   

Notes to Unaudited Consolidated Financial Statements

9

       
 

Item 2.

Managements Discussion and Analysis of Financial Condition and Results of Operations

25

       
 

Item 3.

Quantitative and Qualitative Disclosure about Market Risk

35

       
 

Item 4.

Controls and Procedures

35

     

Part II.

Other Information:

 
       
 

Item 1.

Legal Proceedings

37

       
 

Item 1A.

Risk Factors

37

       
 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

40

       
 

Item 5.

Other Information

              40

       
 

Item 6.

Exhibits

41

     
 

Signatures

42

 

 

Part I. Financial Information

Item 1. Financial Statements

 

LeMaitre Vascular, Inc.

Consolidated Balance Sheets

 

  

(unaudited)

     
  

September 30,

  

December 31,

 
  

2021

  

2020

 
  

(in thousands, except share data)

 

Assets

        

Current assets:

        

Cash and cash equivalents

 $17,369  $26,764 

Short-term marketable securities

  49,710   214 

Accounts receivable, net of allowances of $632 at September 30, 2021 and $623 at December 31, 2020

  19,501   19,552 

Inventory and other deferred costs

  44,326   45,115 

Prepaid expenses and other current assets

  3,110   2,618 

Total current assets

  134,016   94,263 
         

Property and equipment, net

  16,997   15,036 

Right-of-use leased assets

  15,664   16,066 

Goodwill

  65,945   65,945 

Other intangibles, net

  54,230   58,905 

Deferred tax assets

  1,627   1,686 

Other assets

  994   909 

Total assets

 $289,473  $252,810 
         

Liabilities and stockholders equity

        

Current liabilities:

        

Current portion of long-term debt

 $-  $2,500 

Revolving line of credit

  -   - 

Accounts payable

  3,137   2,394 

Accrued expenses

  16,460   17,525 

Acquisition-related obligations

  616   772 

Lease liabilities - short-term

  1,901   1,954 

Total current liabilities

  22,114   25,145 
         

Long-term debt

  -   35,532 

Lease liabilities - long-term

  14,589   14,791 

Deferred tax liabilities

  122   127 

Other long-term liabilities

  3,600   4,643 

Total liabilities

  40,425   80,238 
         

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 23,384,129 shares at September 30, 2021, and 22,061,554 shares at December 31, 2020

  234   221 

Additional paid-in capital

  179,070   114,924 

Retained earnings

  84,356   70,554 

Accumulated other comprehensive loss

  (2,636)  (1,525)

Treasury stock, at cost; 1,546,036 shares at September 30, 2021 and 1,538,572 shares at December 31, 2020

  (11,976)  (11,602)

Total stockholders’ equity

  249,048   172,572 

Total liabilities and stockholders’ equity

 $289,473  $252,810 

 

See accompanying notes to consolidated financial statements. 

 

 

 

LeMaitre Vascular, Inc.

Consolidated Statements of Operations

(unaudited)

 

   

Three months ended

   

Nine months ended

 
   

September 30,

   

September 30,

 
   

2021

   

2020

   

2021

   

2020

 
   

(in thousands, except per share data)

   

(in thousands, except per share data)

 
                                 

Net sales

  $ 38,368     $ 36,416     $ 114,921     $ 91,818  

Cost of sales

    13,502       13,712       39,495       31,602  
                                 

Gross profit

    24,866       22,704       75,426       60,216  
                                 

Sales and marketing

    6,941       5,157       20,210       17,788  

General and administrative

    6,004       5,901       18,748       16,425  

Research and development

    2,848       2,098       8,344       7,230  

Gain on sale of building

    -       (470 )     -       (470 )
                                 

Total operating expenses

    15,793       12,686       47,302       40,973  
                                 

Income from operations

    9,073       10,018       28,124       19,243  
                                 

Other income (expense):

                               

Interest income

    54       15       56       194  

Interest expense

    (621 )     (665 )     (1,693 )     (732 )

Foreign currency gain (loss)

    (72 )     10       (105 )     (280 )
                                 

Income before income taxes

    8,434       9,378       26,382       18,425  

Provision for income taxes

    1,930       1,865       5,650       4,238  
                                 

Net income

  $ 6,504     $ 7,513     $ 20,732     $ 14,187  
                                 

Earnings per share of common stock:

                               

Basic

  $ 0.30     $ 0.37     $ 0.99     $ 0.70  

Diluted

  $ 0.30     $ 0.37     $ 0.98     $ 0.69  
                                 

Weighted-average shares outstanding:

                               

Basic

    21,592       20,254       20,920       20,201  

Diluted

    21,935       20,474       21,251       20,434  
                                 

Cash dividends declared per common share

  $ 0.110     $ 0.095     $ 0.330     $ 0.285  

 

See accompanying notes to consolidated financial statements. 

 

 

 

LeMaitre Vascular, Inc.

Consolidated Statements of Comprehensive Income

(unaudited) 

 

   

Three months ended

   

Nine months ended

 
   

September 30,

   

September 30,

 
   

2021

   

2020

   

2021

   

2020

 
   

(in thousands)

   

(in thousands)

 

Net income

  $ 6,504     $ 7,513     $ 20,732     $ 14,187  

Other comprehensive income (loss):

                               

Foreign currency translation adjustment, net

    (335 )     1,142       (1,052 )     988  

Unrealized gain (loss) on short-term marketable securities

    (58 )     8       (59 )     10  

Total other comprehensive income (loss)

    (393 )     1,150       (1,111 )     998  
                                 

Comprehensive income

  $ 6,111     $ 8,663     $ 19,621     $ 15,185  

 

See accompanying notes to consolidated financial statements.

 

 

 

LeMaitre Vascular, Inc.

Consolidated Statements of Stockholders Equity

(unaudited) 

 

                                   

Accumulated

                         
                   

Additional

           

Other

                   

Total

 
   

Common Stock

   

Paid-in

   

Retained

   

Comprehensive

   

Treasury Stock

   

Stockholders

 
   

Shares

   

Amount

   

Capital

   

Earnings

   

Income (Loss)

   

Shares

   

Amount

   

Equity

 
                                                                 
                                                                 

Balance at December 31, 2020

    22,061,554     $ 221     $ 114,924     $ 70,554     $ (1,525 )     1,538,572     $ (11,602 )   $ 172,572  
                                                                 

Net income

                        5,929                           5,929  

Other comprehensive income (loss)

                              (938 )                   (938 )

Issuance of common stock for stock options exercised

    63,895       -       1,385                               1,385  

Vested restricted stock units

    5,974       -                                     -  

Stock-based compensation expense

                  927                                 927  

Repurchase of common stock for net settlement of equity awards

                                  2,241       (88 )     (88 )

Common stock dividend paid

                        (2,262 )                         (2,262 )
                                                                 

Balance at March 31, 2021

    22,131,423       221       117,236       74,221       (2,463 )     1,540,813       (11,690 )     177,525  
                                                                 

Net income

                        8,299                           8,299  

Other comprehensive income

                              220                     220  

Issuance of common stock for stock options exercised

    70,355       1       1,186                               1,187  

Stock-based compensation expense

                  869                                 869  

Common stock dividend paid

                        (2,267 )                         (2,267 )
                                                                 

Balance at June 30, 2021

    22,201,778     $ 222     $ 119,291     $ 80,253     $ (2,243 )     1,540,813     $ (11,690 )   $ 185,833  
                                                                 

Net income

                        6,504                           6,504  

Other comprehensive income (loss)

                              (393 )                   (393 )

Issuance of common stock

    1,150,000       12       58,683                               58,695  

Issuance of common stock for stock options exercised

    17,410       -       299                               299  

Vested restricted stock units

    14,941       -       -                               -  

Stock-based compensation expense

                  797                                 797  

Repurchase of common stock for net settlement of equity awards

                                  5,223       (286 )     (286 )

Common stock dividend paid

                        (2,401 )                         (2,401 )
                                                                 

Balance at September 30, 2021

    23,384,129       234       179,070       84,356       (2,636 )     1,546,036       (11,976 )     249,048  

 

See accompanying notes to consolidated financial statements.  

 

 

                                   

Accumulated

                         
                   

Additional

           

Other

                   

Total

 
   

Common Stock

   

Paid-in

   

Retained

   

Comprehensive

   

Treasury Stock

   

Stockholders

 
   

Shares

   

Amount

   

Capital

   

Earnings

   

Income (Loss)

   

Shares

   

Amount

   

Equity

 
                                                                 
                                                                 

Balance at December 31, 2019

    21,678,927     $ 217     $ 105,934     $ 57,029     $ (4,007 )     1,522,035     $ (11,032 )   $ 148,141  
                                                                 

Net income

                        3,174                           3,174  

Other comprehensive income (loss)

                              (1,518 )                   (1,518 )

Issuance of common stock for stock options exercised

    19,141       -       233                               233  

Vested restricted stock units

    4,074       -       -                               -  

Stock-based compensation expense

                  779                                 779  

Repurchase of common stock for net settlement of equity awards

                                  1,601       (57 )     (57 )

Common stock dividend accrued

                        (1,917 )                         (1,917 )
                                                                 

Balance at March 31, 2020

    21,702,142       217       106,946       58,286       (5,525 )     1,523,636       (11,089 )     148,835  
                                                                 

Net income

                        3,500                           3,500  

Other comprehensive income

                              1,366                     1,366  

Issuance of common stock for stock options exercised

    3,000       -       42                               42  

Vested restricted stock units

    192       -       -                               -  

Stock-based compensation expense

                  803                                 803  

Common stock dividend paid

                        (1,917 )                         (1,917 )
                                                                 

Balance at June 30, 2020

    21,705,334       217       107,791       59,869       (4,159 )     1,523,636       (11,089 )     152,629  
                                                                 

Net income

                        7,513                           7,513  

Other comprehensive income

                              1,150                     1,150  

Issuance of common stock for stock options exercised

    92,014       1       1,162                               1,163  

Vested restricted stock units

    22,576       -       -                               -  

Stock-based compensation expense

                  687                                 687  

Repurchase of common stock for net settlement of equity awards

                                  7,530       (234 )     (234 )

Common stock dividend paid

                        (1,925 )                         (1,925 )
                                                                 

Balance at September 30, 2020

    21,819,924     $ 218     $ 109,640     $ 65,457     $ (3,009 )     1,531,166     $ (11,323 )   $ 160,983  

 

 

 

LeMaitre Vascular, Inc.

Consolidated Statements of Cash Flows

(unaudited)

 

   

For the nine months ended

 
   

September 30,

 
   

2021

   

2020

 
   

(in thousands)

 

Operating activities

               

Net income

  $ 20,732     $ 14,187  

Adjustments to reconcile net income to net cash provided by operating activities:

               

Depreciation and amortization

    8,186       5,861  

Stock-based compensation

    2,593       2,269  

Fair value adjustment to contingent consideration obligations

    (454 )     132  

Provision for doubtful accounts

    136       257  

Provision for inventory write-downs

    3,016       1,032  

Gain on sale of building

    -       (470 )

Foreign currency transaction loss

    322       49  

Changes in operating assets and liabilities:

               

Accounts receivable

    (425 )     (1,326 )

Inventory and other deferred costs

    (2,752 )     (3,228 )

Prepaid expenses and other assets

    (741 )     35  

Accounts payable and other liabilities

    (567 )     1,850  

Net cash provided by operating activities

    30,046       20,648  
                 

Investing activities

               

Purchases of property and equipment and other assets

    (4,276 )     (1,767 )

Proceeds from sale of building

    -       2,023  

Payments related to acquisitions

    -       (72,627 )

Purchases of short-term marketable securities

    (49,554 )     (2,193 )

Proceeds from sales of marketable securities

    -       18,000  

Net cash used in investing activities

    (53,830 )     (56,564 )
                 

Financing activities

               

Payments of deferred acquisition consideration

    (401 )     (976 )

Proceeds from revolving line of credit

    -       25,000  

Proceeds from issuance of long-term debt

    -       40,000  

Payments of revolving line of credit

    -       (4,000 )

Payments of long-term debt

    (39,000 )     (500 )

Payment of deferred debt issuance costs

    -       (1,751 )

Proceeds from issuance of common stock

    61,566       1,437  

Purchase of treasury stock for net settlement of equity awards

    (374 )     (291 )

Common stock cash dividend paid

    (6,930 )     (5,759 )

Net cash provided by (used in) financing activities

    14,861       53,160  
                 

Effect of exchange rate changes on cash and cash equivalents

    (472 )     249  

Net increase in cash and cash equivalents

    (9,395 )     17,493  

Cash and cash equivalents at beginning of period

    26,764       11,786  

Cash and cash equivalents at end of period

  $ 17,369     $ 29,279  

Supplemental disclosures of cash flow information (see Note 13)

               

 

See accompanying notes to consolidated financial statements. 

 

 

LeMaitre Vascular, Inc.

Notes to Consolidated Financial Statements

September 30, 2021

(unaudited)

 

 

1. Organization and Basis for Presentation

 

     Description of Business

 

Unless the context requires otherwise, references to LeMaitre Vascular, we, our, and us refer to LeMaitre Vascular, Inc. and our subsidiaries. We develop, manufacture, and market medical devices and implants used primarily in the field of vascular surgery. We also derive revenues from the processing and cryopreservation of human tissues for implantation in patients. We operate in a single segment in which our principal product lines include the following: 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; Saint-Etienne, France; Hereford, England; Kensington, Australia; Tokyo, Japan; Shanghai, China; and Singapore.

 

    

Basis of Presentation

 

The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (GAAP) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments, consisting only of normal, recurring adjustments considered necessary for a fair presentation of the results of these interim periods have been included. Preparing financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. Actual results may differ from these estimates. Our estimates and assumptions, including those related to bad debts, inventories, intangible assets, sales returns and discounts, share-based compensation, and income taxes are updated as appropriate. The results for the nine months ended September 30, 2021 are not necessarily indicative of results to be expected for the entire year. The information contained in these interim financial statements should be read in conjunction with our audited consolidated financial statements as of and for the year ended December 31, 2020, including the notes thereto, included in our Form 10-K filed with the Securities and Exchange Commission (SEC) on March 12, 2021.

 

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the unaudited consolidated financial statements and accompanying notes to unaudited consolidated financial statements. Due to the COVID-19 pandemic, there is heightened volatility and uncertainty in customer demand and the worldwide economy in general.  The magnitude and duration of any impact on our revenues and operations from COVID-19 is uncertain and cannot be reasonably estimated at this time. The Company is not aware of any specific event or circumstance that would require an update to its accounting estimates or adjustments to the carrying value of its assets and liabilities as of November 4, 2021, the issuance date of this Quarterly Report on Form 10-Q. Actual results could differ from those estimates.

 

    

Consolidation

 

Our consolidated financial statements include the accounts of LeMaitre Vascular and the accounts of our wholly-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation.

 

    

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.

 

 

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 recognize 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 Vascular 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): 

 

  

Three months ended September 30,

  

Nine months ended September 30,

 
                 
  

2021

  

2020

  

2021

  

2020

 
  

($ in thousands)

  

($ in thousands)

 
                 

Americas

 $25,299  $24,184  $76,327  $57,462 

Europe, Middle East and Africa

  10,535   10,039   31,200   28,339 

Asia Pacific

  2,534   2,193   7,394   6,017 

Total

 $38,368  $36,416  $114,921  $91,818 

 

 

We do not carry any contract assets or contract liabilities, as there are generally no unbilled amounts due from customers under contracts for which we have partially satisfied performance obligations, or amounts received from customers for which we have not satisfied performance obligations. We satisfy our performance obligations under revenue contracts within a very short time period from receipt of the orders, and payments from customers are typically received within 30 to 60 days of fulfillment of the orders, except in certain geographies such as Spain and Italy where the payment cycle is customarily longer. Accordingly, there is no significant financing component to our revenue contracts. Additionally, we have elected as a policy that incremental costs (such as commissions) incurred to obtain contracts are expensed as incurred, due to the short-term nature of the contracts.

 

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.

 

 

Recent Accounting Pronouncements

 

In December 2019, the FASB issued ASU 2019-12 Income Taxes (Topic 740), which simplifies the accounting for income taxes by removing certain exceptions to the general principles in Topic 740, as well as clarifying and amending other areas of existing GAAP under Topic 740. The new standard was effective for us beginning January 1, 2021. The adoption of this standard did not have a material impact on our financial statements.

 

 

 

2. Income Tax Expense

 

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

 

We recognize, measure, present and disclose in our financial statements any uncertain tax positions that we have taken, or expect to take on a tax return. We operate in multiple taxing jurisdictions, both within and without the United States, and may be subject to audits from various tax authorities. Management’s judgment is required in determining our provision for income taxes, our deferred tax assets and liabilities, liabilities for uncertain tax positions, and any valuation allowance recorded against our net deferred tax assets. We will monitor the realizability of our deferred tax assets and adjust the valuation allowance accordingly.

 

Our policy is to classify interest and penalties related to unrecognized tax benefits as income tax expense. Our 2021 income tax expense varies from the statutory rate mainly due to the generation of federal and state tax credits, permanent items, different statutory rates from our foreign subsidiaries, and discrete stock option exercises. Our 2020 income tax expense varied from the statutory rate mainly due to the generation of federal and state tax credits, permanent items, and different statutory rates from our foreign subsidiaries.

 

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 September 30, 2021, the gross amount of unrecognized tax benefits exclusive of interest and penalties was $787,000. We remain subject to examination until the statute of limitations expires for each respective tax jurisdiction. The statute of limitations will be open with respect to these tax positions until 2028. A reconciliation of beginning and ending amount of our unrecognized tax benefits is as follows:

 

  

Nine months ended

September 30, 2021

 
  

(in thousands)

 

Unrecognized tax benefits as of December 31, 2020

 $820 

Additions for tax positions of current year

  - 

Additions/adjustments for tax positions of prior years

  (33)

Reductions for settlements with taxing authorities

  - 

Reductions for lapses of the applicable statutes of limitations

  - 

Unrecognized tax benefits as of September 30, 2021

 $787 

 

 

As of September 30, 2021, a summary of the tax years that remain subject to examination in our taxing jurisdictions is as follows:

 

United States

2017 and forward

Foreign

2014 and forward

 

Cash paid for income taxes was $7.5 million and $3.7 million for the nine month periods ended September 30, 2021 and September 30, 2020, respectively.

 

 

 

3. Inventories and Other Deferred Costs

 

Inventories and other deferred costs consist of the following:

 

  

September 30, 2021

  

December 31, 2020

 
  

(in thousands)

 

Raw materials

 $4,688  $5,044 

Work-in-process

  10,589   6,004 

Finished products

  23,521   28,117 

Other deferred costs

  5,528   5,950 
         

Total inventory and other deferred costs

 $44,326  $45,115 

 

We had inventory on consignment at customer sites of $2.0 million and $2.1 million at September 30, 2021 and December 31, 2020, respectively.

 

Other deferred costs relate to our RestoreFlow allograft offering and 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 United States federal law, human tissues cannot be bought or sold. Therefore, the vascular and cardiac tissues we preserve are not held as inventory, and the costs we incur to procure and process them are instead accumulated and deferred. These costs include fixed and variable overhead costs associated with the cryopreservation process, including primarily direct labor costs, tissue recovery fees, inbound freight charges, indirect materials and facilities costs. General and administrative expenses and selling expenses associated with the provision of these services are expensed as incurred.

 

 

 

4. Acquisitions

 

Our acquisitions are accounted for using the acquisition method, and the acquired companies’ results have been included in the accompanying consolidated financial statements from their respective dates of acquisition. In each case for the acquisitions disclosed below, pro forma information assuming the acquisition had occurred at the beginning of the earliest period presented is not included, as the impact is immaterial.

 

Our acquisitions have historically been made at prices above the fair value of the acquired identifiable assets, resulting in goodwill, due to expectations of synergies that will be realized by combining businesses. These synergies include the use of our existing sales channel to expand sales of the acquired businesses’ products and services, consolidation of manufacturing facilities, and the leveraging of our existing administrative infrastructure.

 

The fair market valuations associated with these transactions fall within Level 3 of the fair value hierarchy, due to the use of significant unobservable inputs to determine fair value. The fair value measurements were calculated using unobservable inputs, primarily using the income approach, specifically the discounted cash flow method. 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. Our assumptions associated with these Level 3 valuations are discussed below and in Note 13 to these financial statements.

 

    Artegraft Biologic Grafts

 

On June 22, 2020, we entered into an Asset Purchase Agreement (Artegraft APA) to acquire the bovine carotid artery graft business from Artegraft, Inc., which, subsequent to the closing, changed its 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 bovine carotid artery grafts (the Products), other than specifically identified excluded assets. The acquired assets included inventory, accounts receivable, machinery and equipment, intellectual property, permits and approvals, data and records, and customer and supplier information. At closing, $72.5 million of the purchase price was paid to Artegraft, Inc. and other parties as specified in the Artegraft APA, including $7.5 million into an escrow account. The escrow amount is to be held until December 31, 2021 to cover any potential claims against LeMaitre or Artegraft, Inc., after which it will be released to Artegraft, Inc. by mutual consent of the parties.

 

 

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 the Product have been sold to third parties from January 1, 2021 to December 31, 2021;

 

 

$5.8 million upon final determination that 24,000 units of the Product have been sold to third parties from January 1, 2022 to December 31, 2022; and

 

 

$5.8 million upon final determination that 28,800 units of the Product have been sold to third parties from January 1, 2023 to December 31, 2023.

 

The Artegraft APA includes a catch-up feature on the earn-outs such that, at the end of the three-year period, if the sum of the unit sales for all three years is greater than or equal to 58,240 unit sales (80% of the combined individual-year targets), Artegraft, Inc. will receive a “catch-up payment” in an amount equal to (a) $17,500,000 times a fraction, the numerator of which is the aggregate number of unit sales for the three-year period, and the denominator of which is 72,800 less (b) any individual-year earn-out previously paid. We recorded this liability at a fair value of $0.4 million to reflect management’s estimate of the likelihood of achieving these targets, as well as the time value of money until payment.

 

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.

 

  

Allocated

 
  

Fair Value

 
  

(in thousands)

 

Inventory

 $3,859 

Accounts receivable

  1,789 

Equipment and supplies

  1,140 

Accounts payable and other

  (53)

Intangible assets

  39,056 

Goodwill

  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.

 

 

The following table reflects the allocation of purchase consideration to the acquired intangible assets and related estimated useful lives: 

 

 

  

Allocated

  

Estimated

 
  

Fair Value

  

Useful Life (years)

 
  

(in thousands)

     

Customer relationships

 $20,310   15.0 

Intellectual property

  16,449   10.0 

Non-compete agreement

  104   5.0 

Tradenames

  2,193   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.

 

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 $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.

 

 

During the quarter ended September 30, 2020, we recorded a $1.3 million adjustment to goodwill with an offsetting adjustment to deferred income taxes to reflect the difference between book basis and tax basis of the technology license. The following table summarizes the purchase price allocation:

 

  

Allocated

 
  

Fair Value

 
  

(in thousands)

 

Inventory and other

 $1,343 

Deferred tax assets

  1,345 

Intangible assets

  8,725 

Goodwill

  5,999 
     

Purchase price

 $17,412 

 

The goodwill results from expected synergies of combining the acquired products and customer information to our existing operations, and is deductible for tax purposes over 15 years.

 

The following table reflects the allocation of purchase consideration to the acquired intangible assets and related estimated useful lives: 

 

      

Weighted

 
  

Allocated

  

Average

 
  

Fair Value

  

Useful Life (years)

 
  

(in thousands)

     

Customer relationships

 $5,562   12.0 

Intellectual property

  2,335   8.0 

Non-compete agreement

  361   5.0 

Tradenames

  467   8.0 
         

Total intangible assets

 $8,725     

 

The weighted-average amortization period of the acquired intangible assets was 10.4 years.

 

     Tru-Incise Valve Cutter

 

On July 12, 2019 (the Closing Date), we entered into an agreement with UreSil, LLC to purchase the remaining assets of their Tru-Incise valve cutter business (since rebranded as Eze-Sit), including distribution rights in the United States. We also entered into a TSA under which UreSil, LLC continued to manufacture the acquired products for us for a specified time, until we transitioned the full manufacturing process to our Burlington, Massachusetts facilities. This manufacturing transfer is now complete.

 

The purchase price for the acquired assets, which included inventory, machinery and equipment, intellectual property, and customer and supplier information, was $8.0 million. Of this amount, $6.8 million was paid on the Closing Date, with three follow-on payments of $0.4 million each due on the first, second and third anniversaries of the Closing Date.  The deferred amounts totaling $1.2 million were recorded at an acquisition-date fair value of $1.1 million using a discount rate of 4.19% to reflect the time value of money between the acquisition date and the payment due dates. There are no contingencies associated with these holdback payments, although they may be reduced for certain post-closing claims. The first payment was made without adjustment in July 2020. The second payment was made without adjustment in July 2021.

 

 

The following table summarizes the purchase price allocation: 

 

  

Allocated

 
  

Fair Value

 
  

(in thousands)

 

Inventory

 $276 

Equipment and supplies

  70 

Intangible assets

  4,844 

Goodwill

  2,748 
     

Purchase price

 $7,938 

 

The goodwill results from expected synergies of combining the acquired products and customer information to our existing operations, and is deductible for tax purposes over 15 years.

 

The following table reflects the allocation of purchase consideration to the acquired intangible assets and related estimated useful lives:

 

      

Weighted

 
  

Allocated

  

Average

 
  

Fair Value

  

Useful Life (years)

 
  

(in thousands)

     

Customer relationships

 $3,945   13.0 

Intellectual property

  563   7.0 

Non-compete agreement

  233   5.0 

Tradenames

  103   7.0 
         

Total intangible assets

 $4,844     

 

The weighted-average amortization period of the acquired intangible assets was 11.8 years.

 

 

 

5. Goodwill and Other Intangible Assets

 

 There was no change to goodwill during the nine months ended September 30, 2021. Other intangible assets consist of the following:

 

  

September 30, 2021

  

December 31, 2020

 
  

Gross

      

Net

  

Gross

      

Net

 
  

Carrying

  

Accumulated

  

Carrying

  

Carrying

  

Accumulated

  

Carrying

 
  

Value

  

Amortization

  

Value

  

Value

  

Amortization

  

Value

 
  

(in thousands)

 

Product technology and intellectual property

 $29,951  $10,167  $19,784  $29,951  $7,947  $22,004 

Trademarks, tradenames and licenses

  4,000   1,398   2,602   4,000   1,094   2,906 

Customer relationships

  38,525   7,352   31,173   38,525   5,424   33,101 

Other intangible assets

  1,767   1,096   671   1,767   873   894 
                         

Total identifiable intangible assets

 $74,243  $20,013  $54,230  $74,243  $15,338  $58,905 

 

 

These intangible assets are being amortized over their useful lives ranging from two to 16 years. The weighted-average amortization period for these intangibles as of September 30, 2021 is 12.1 years. Amortization expense is included in general and administrative expense and was as follows for the periods indicated.

 

  

Three months ended September 30,

  

Nine months ended September 30,

 
  

2021

  

2020

  

2021

  

2020

 
  

(in thousands)

  

(in thousands)

 
                 

Amortization expense

 $1,547  $1,681  $4,675  $3,409 

 

We estimate that amortization expense for the remainder of 2021 and for each of the five succeeding fiscal years will be as follows:

 

      

Year ended December 31,

     
  

2021

  

2022

  

2023

  

2024

  

2025

  

2026

 
  

(in thousands)

     
                         

Amortization expense

 $1,505  $5,975  $5,902  $5,706  $5,467  $5,001 

 

 

 

6. Revolving Line of Credit and Long-term Debt

 

In connection with the acquisition of the Artegraft biologic graft business, we incurred debt in the amount of $65 million under a senior secured credit facility with a group of banks. This credit arrangement included a $25 million revolving credit line 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 nine months ended September 30, 2021, we made scheduled principal payments on the term loan of $1.0 million, and repaid the loan in full. Cash paid for interest during the nine months ended September 30, 2021 was $0.9 million.

 

Under the terms of the agreement, the loans bear interest at a rate per annum of, at our option, either (i) the Base Rate plus an applicable margin of from 1.25% to 1.75% depending on our consolidated leverage ratio, or (ii) the Eurodollar Rate plus an applicable margin of from 2.25% to 2.75% depending on our consolidated leverage ratio. Base Rate is defined in the credit agreement as a fluctuating rate per annum of the Federal Funds rate plus 0.5% or the prime rate of interest established from time to time by KeyBank National Association.

 

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 are or 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%. During the three months ended September 30, 2021, in connection with prepaying the term loan in full, we expensed the remaining unamortized transaction costs allocated to the term loan of $0.6 million. The issuance costs allocated to the revolver of $0.5 million as of September 30, 2021 will continue to be amortized on a straight-line basis as the line of credit is still available to us.

 

The term of the revolving line of credit is five years, with all outstanding amounts due on June 22, 2025. As of September 30, 2021, we had no borrowings outstanding under our revolving line of credit.

 

Because the revolving line of credit is still available to us, we must comply with various financial and non-financial covenants, which are set forth in the Credit Agreement governing the credit facility. The primary financial covenant consists of a maximum consolidated leverage ratio. The lenders are entitled to accelerate repayment of the loans and terminate the revolving credit commitment upon the occurrence of any of various events of default as described in the Credit Agreement. We were in compliance with the covenants as of September 30, 2021. Borrowings under the secured credit facility are secured by 100% of the stock of our domestic subsidiaries, portions of the stock of certain of our foreign subsidiaries, and substantially all of our and our subsidiaries’ other property and assets, in each case subject to various exceptions.

 

We are required to make mandatory prepayments of any revolving credit loans in various amounts if we have Excess Cash Flow (as defined in the Credit Agreement, and commencing in respect of our fiscal year ending December 31, 2021), if we make certain sales of assets outside the ordinary course of business above certain thresholds or if we suffer certain property loss events above certain thresholds.

 

 

 

 

7. Leases

 

We conduct the majority of our operations in leased facilities, all of which are accounted for as operating leases, as they do not meet the criteria for finance leases. Our principal worldwide executive, distribution, and manufacturing operations are located in five leased facilities with square footage totaling 109,354 in Burlington, Massachusetts. All five Burlington leases expire in December 2030. In addition, our European operations are headquartered at a 16,470 square foot leased facility located in Sulzbach, Germany under a lease which expires in August 2023. This lease contains two five-year renewal options. We also lease a 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, Italy, Spain and Illinois. Our lease in Canada contains a five-year renewal option exercisable in February 2023. 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 September 30, 2021.

 

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 quarter ended June 30, 2021 we entered into a five-year lease for printing equipment.

 

We account for leases under the provisions of ASU No. 2016-02, Leases (Topic 842), subsequently amended by ASU 2018-11, Leases (Topic 842): Targeted Improvements. 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.

 

Our most significant judgment 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:

 

  

Three months ended September 30,

  

Nine months ended September 30,

 
  

2021

  

2020

  

2021

  

2020

 
  

(in thousands)

  

(in thousands)

  

(in thousands)

  

(in thousands)

 
                 

Lease cost

                

Operating lease cost

 $588  $457  $1,682  $1,413 

Short-term lease cost

  123   67   313   123 

Total lease cost

 $711  $524  $1,995  $1,536 
                 

Other information

                

Cash paid for amounts included in the measurement of operating lease liabilities

 $725  $590  $2,106  $1,761 
                 

Right-of-use assets obtained in exchange for new operating lease liabilities

 $-  $96  $1,277  $2,577 
                 
                 

Weighted average remaining lease term - operating leases (in years)

          8.4   8.2 
                 

Weighted average discount rate - operating leases

          4.86%  5.17%

 

 

 

At September 30, 2021, the minimum noncancelable operating lease rental commitments with initial or remaining terms of more than one year are as follows:

 

Remainder of 2021

 $724 

Year ending December 31,

    

2022

  2,670 

2023

  2,332 

2024

  2,104 

2025

  2,153 

2026

  2,155 

Thereafter

  8,198 

Adjustment to net present value as of September 30, 2021

  (3,846)
     

Minimum noncancelable lease liability

 $16,490