UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
Or
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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
(Exact name of registrant as specified in its charter)
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(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
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(Address of principal executive offices) |
(Zip Code) |
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(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Exchange Act:
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Trading Symbol(s) |
Name of each exchange on which registered |
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The |
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.
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).
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.
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Accelerated filer |
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Non-accelerated filer |
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Smaller reporting company |
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Emerging growth company |
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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
The registrant had
FORM 10-Q
TABLE OF CONTENTS
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Page |
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Part I. |
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Item 1. |
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Consolidated Balance Sheets as of September 30, 2023 (unaudited) and December 31, 2022 |
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Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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Item 3. |
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Item 4. |
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Part II. |
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Item 1. |
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Item 1A. |
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Item 2. |
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Item 5. |
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Item 6. |
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Item 1. Financial Statements
LeMaitre Vascular, Inc.
Consolidated Balance Sheets
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(unaudited) |
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September 30, |
December 31, |
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2023 |
2022 |
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(in thousands, except share data) |
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Current assets: |
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Cash and cash equivalents |
$ | $ | ||||||
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Short-term marketable securities |
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Accounts receivable, net of allowances of $ |
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Inventory and other deferred costs |
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Prepaid expenses and other current assets |
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Total current assets |
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Property and equipment, net |
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Right-of-use leased assets |
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Goodwill |
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Other intangibles, net |
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Deferred tax assets |
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Other assets |
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Total assets |
$ | $ | ||||||
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Liabilities and stockholders’ equity |
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Current liabilities: |
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Accounts payable |
$ | $ | ||||||
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Accrued expenses |
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Acquisition-related obligations |
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Lease liabilities - short-term |
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Total current liabilities |
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Lease liabilities - long-term |
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Deferred tax liabilities |
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Other long-term liabilities |
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Total liabilities |
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Stockholders’ equity: |
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Preferred stock, $ |
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Common stock, $ |
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Additional paid-in capital |
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Retained earnings |
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Accumulated other comprehensive loss |
( |
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Treasury stock, at cost; |
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Total stockholders’ equity |
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Total liabilities and stockholders’ equity |
$ | $ | ||||||
See accompanying notes to consolidated financial statements.
Consolidated Statements of Operations
(unaudited)
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Three months ended |
Nine months ended |
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September 30, |
September 30, |
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2023 |
2022 |
2023 |
2022 |
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(in thousands, except per share data) |
(in thousands, except per share data) |
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Net sales |
$ | $ | $ | $ | ||||||||||||
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Cost of sales |
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Gross profit |
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Sales and marketing |
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General and administrative |
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Research and development |
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Restructuring |
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Total operating expenses |
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Income from operations |
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Other income (expense): |
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Interest income |
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Foreign currency loss |
( |
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Income before income taxes |
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Provision for income taxes |
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Net income |
$ | $ | $ | $ | ||||||||||||
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Earnings per share of common stock: |
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Basic |
$ | $ | $ | $ | ||||||||||||
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Diluted |
$ | $ | $ | $ | ||||||||||||
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Weighted-average shares outstanding: |
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Basic |
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Diluted |
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Cash dividends declared per common share |
$ | $ | $ | $ | ||||||||||||
See accompanying notes to consolidated financial statements.
Consolidated Statements of Comprehensive Income
(unaudited)
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Three months ended |
Nine months ended |
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September 30, |
September 30, |
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2023 |
2022 |
2023 |
2022 |
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(in thousands) |
(in thousands) |
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Net income |
$ | $ | $ | $ | ||||||||||||
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Other comprehensive income (loss): |
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Foreign currency translation adjustment, net |
( |
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Unrealized loss on short-term marketable securities |
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Total other comprehensive loss |
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Comprehensive income |
$ | $ | $ | $ | ||||||||||||
See accompanying notes to consolidated financial statements.
Consolidated Statements of Stockholders’ Equity
(unaudited)
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Accumulated |
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Additional |
Other |
Total |
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Common Stock |
Paid-in |
Retained |
Comprehensive |
Treasury Stock |
Stockholders’ |
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Shares |
Amount |
Capital |
Earnings |
Income (Loss) |
Shares |
Amount |
Equity |
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Balance at December 31, 2022 |
$ | $ | $ | $ | ( |
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Net income |
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Other comprehensive income (loss) |
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Issuance of common stock for stock options exercised |
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Vested restricted stock units |
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Stock-based compensation expense |
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Repurchase of common stock for net settlement of equity awards |
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Common stock dividend paid |
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Balance at March 31, 2023 |
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Net income |
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Other comprehensive income (loss) |
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Issuance of common stock for stock options exercised |
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Vested restricted stock units |
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Stock-based compensation expense |
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Repurchase of common stock for net settlement of equity awards |
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Common stock dividend paid |
( |
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Balance at June 30, 2023 |
$ | $ | $ | $ | ( |
) | $ | ( |
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Net income |
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Other comprehensive income (loss) |
( |
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Issuance of common stock for stock options exercised |
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Vested restricted stock units |
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Stock-based compensation expense |
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Repurchase of common stock for net settlement of equity awards |
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Common stock dividend paid |
( |
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Balance at September 30, 2023 |
$ | $ | $ | $ | ( |
) | $ | ( |
) | $ | ||||||||||||||||||||||
See accompanying notes to consolidated financial statements.
LeMaitre Vascular, Inc.
Consolidated Statements of Stockholders’ Equity
(unaudited)
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Accumulated |
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Additional |
Other |
Total |
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Common Stock |
Paid-in |
Retained |
Comprehensive |
Treasury Stock |
Stockholders’ |
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Shares |
Amount |
Capital |
Earnings |
Income (Loss) |
Shares |
Amount |
Equity |
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Balance at December 31, 2021 |
$ | $ | $ | $ | ( |
) | $ | ( |
) | $ | ||||||||||||||||||||||
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Net income |
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Other comprehensive income (loss) |
( |
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Issuance of common stock for stock options exercised |
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Vested restricted stock units |
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Stock-based compensation expense |
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Repurchase of common stock for net settlement of equity awards |
( |
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Common stock dividend paid |
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Balance at March 31, 2022 |
( |
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Net income |
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Other comprehensive income (loss) |
( |
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Issuance of common stock for stock options exercised |
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Vested restricted stock units |
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Stock-based compensation expense |
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Repurchase of common stock for net settlement of equity awards |
( |
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Common stock dividend paid |
( |
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Balance at June 30, 2022 |
$ | $ | $ | $ | ( |
) | $ | ( |
) | $ | ||||||||||||||||||||||
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Net income |
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Other comprehensive income (loss) |
( |
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Issuance of common stock for stock options exercised |
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Vested restricted stock units |
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Stock-based compensation expense |
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Repurchase of common stock for net settlement of equity awards |
( |
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Common stock dividend paid |
( |
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Balance at September 30, 2022 |
$ | $ | $ | $ | ( |
) | $ | ( |
) | $ | ||||||||||||||||||||||
See accompanying notes to consolidated financial statements.
Consolidated Statements of Cash Flows
(unaudited)
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For the nine months ended |
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2023 |
2022 |
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(in thousands) |
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| Operating activities | ||||||||
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Net income |
$ | $ | ||||||
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Adjustments to reconcile net income to net cash provided by operating activities: |
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Depreciation and amortization |
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Stock-based compensation |
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Fair value adjustment to contingent consideration obligations |
( |
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Provision for credit losses |
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Provision for inventory write-downs |
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Loss on disposal of property and equipment |
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Loss on divestitures |
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Foreign currency transaction (gain) loss |
( |
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Changes in operating assets and liabilities: |
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Accounts receivable |
( |
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Inventory and other deferred costs |
( |
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Prepaid expenses and other assets |
( |
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Accounts payable and other liabilities |
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Net cash provided by operating activities |
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Investing activities |
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Purchases of property and equipment and other assets |
( |
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Payments related to acquisitions |
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Purchases of short-term marketable securities |
( |
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Net cash used in investing activities |
( |
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Financing activities |
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Payments of deferred acquisition consideration |
( |
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Proceeds from issuance of common stock |
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Purchase of treasury stock for net settlement of equity awards |
( |
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Common stock cash dividend paid |
( |
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Net cash used in financing activities |
( |
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Effect of exchange rate changes on cash and cash equivalents |
( |
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Net increase (decrease) in cash and cash equivalents |
( |
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Cash and cash equivalents at beginning of period |
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Cash and cash equivalents at end of period |
$ | $ | ||||||
See accompanying notes to consolidated financial statements.
Notes to Consolidated Financial Statements
September 30, 2023
(unaudited)
1. Organization and Basis for Presentation
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, 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; Dublin, Ireland; Kensington, Australia; Tokyo, Japan; Shanghai, China; Singapore; Seoul, Korea; and Bangkok, Thailand.
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, 2023 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, 2022, including the notes thereto, included in our Form 10-K filed with the Securities and Exchange Commission (SEC) on March 1, 2023.
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. 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 7, 2023, 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 direct to hospitals and to a lesser extent to international 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 to the performance obligations
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):
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Three months ended September 30, |
Nine months ended September 30, |
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2023 |
2022 |
2023 |
2022 |
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($ in thousands) |
($ in thousands) |
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Americas |
$ | $ | $ | $ | ||||||||||||
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Europe, Middle East and Africa |
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Asia Pacific |
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Total |
$ | $ | $ | $ | ||||||||||||
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
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
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 the 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. 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 inside and outside 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 2023 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 2022 income tax expense varied 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.
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, 2023, the gross amount of unrecognized tax benefits exclusive of interest and penalties was $
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Nine months ended September 30, 2023 |
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(in thousands) |
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Unrecognized tax benefits as of December 31, 2022 |
$ | |||
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Additions/adjustments for tax positions of current year |
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Additions/adjustments for tax positions of prior years |
( |
) | ||
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Reductions for settlements with taxing authorities |
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Reductions for lapses of the applicable statutes of limitations |
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Unrecognized tax benefits as of September 30, 2023 |
$ | |||
As of September 30, 2023, a summary of the tax years that remain subject to examination in our taxing jurisdictions is as follows:
|
United States |
2019 and forward |
|
Foreign |
2015 and forward |
3. Inventories and Other Deferred Costs
Inventories and other deferred costs consist of the following:
|
September 30, 2023 |
December 31, 2022 |
|||||||
|
(in thousands) |
||||||||
|
Raw materials |
$ | $ | ||||||
|
Work-in-process |
||||||||
|
Finished products |
||||||||
|
Other deferred costs |
||||||||
|
Total inventory and other deferred costs |
$ | $ | ||||||
We had inventory on consignment at customer sites of $
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 and cardiac tissues are instead accumulated and deferred. These costs include fixed and variable overhead costs associated with the cryopreservation process, including primarily direct labor costs, tissue recovery fees, inbound freight charges, indirect materials and facilities costs. General and administrative expenses and selling expenses associated with the provision of these services are expensed as incurred.
4. 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 $
On October 10, 2022, we sold the St. Etienne, France building, building improvements, and land for $
During the nine months ended September 30, 2023, we recorded additional restructuring charges of $
|
5. |
Goodwill and Other Intangible Assets |
There was no change to goodwill during the nine months ended September 30, 2023. Other intangible assets consist of the following:
|
September 30, 2023 |
December 31, 2022 |
|||||||||||||||||||||||
|
Gross |
Net |
Gross |
Net |
|||||||||||||||||||||
|
Carrying |
Accumulated |
Carrying |
Carrying |
Accumulated |
Carrying |
|||||||||||||||||||
|
Value |
Amortization |
Value |
Value |
Amortization |
Value |
|||||||||||||||||||
|
(in thousands) |
||||||||||||||||||||||||
|
Product technology and intellectual property |
$ | $ | $ | $ | $ | $ | ||||||||||||||||||
|
Trademarks, tradenames and licenses |
||||||||||||||||||||||||
|
Customer relationships |
||||||||||||||||||||||||
|
Other intangible assets |
||||||||||||||||||||||||
|
Total identifiable intangible assets |
$ | $ | $ | $ | $ | $ | ||||||||||||||||||
These assets are being amortized over useful lives ranging from
|
Three months ended September 30, |
Nine months ended September 30, |
|||||||||||||||
|
2023 |
2022 |
2023 |
2022 |
|||||||||||||
|
(in thousands) |
(in thousands) |
|||||||||||||||
|
Amortization expense |
$ | $ | $ | $ | ||||||||||||
We estimate that amortization expense for the remainder of 2023 and for each of the five succeeding fiscal years will be as follows:
|
Year ended December 31, |
||||||||||||||||||||||||
|
2023 |
2024 |
2025 |
2026 |
2027 |
2028 |
|||||||||||||||||||
|
(in thousands) |
||||||||||||||||||||||||
|
Amortization expense |
$ | $ | $ | $ | $ | $ | ||||||||||||||||||
6. Leases
The Company determines if an arrangement is a lease at inception of the contract. The Company has operating leases for buildings, primarily for office space, manufacturing and distribution, as well as automobiles and printing equipment. At September 30, 2023, the Company has the following building and facility leases capitalized on the balance sheet:
|
Location (leases) |
Purpose |
Approx. Sq. Ft. |
Expiration |
||||
|
Americas |
|||||||
|
Burlington, MA (5) |
Corporate headquarters, manufacturing and distribution |
December 2030 |
|||||
|
North Brunswick, NJ (1) |
Artegraft biologic business |
October 2029 |
|||||
|
Fox River Grove, IL (3) |
RestoreFlow allografts business |
November 2025 |
|||||
|
Vaughn, Canada |
Canada sales office and distribution |
February 2026 |
|||||
|
Chandler, Arizona |
US sales office |
August 2025 |
|||||
|
Europe, Middle East and Africa |
|||||||
|
Sulzbach, Germany |
European headquarters and distribution |
June 2031 |
|||||
|
Milan,Italy |
Italy sales office and distribution |
July 2027 |
|||||
|
Hereford, England |
United Kingdom sales office and distribution |
October 2029 |
|||||
|
Madrid, Spain |
Spain sales office |
June 2029 |
|||||
|
Asia Pacific |
|||||||
|
Singapore |
Asia Pacific headquarters and distribution |
June 2024 |
|||||
|
Tokyo, Japan |
Japan sales office and distribution |
July 2025 |
|||||
|
Bangkok, Thailand |
Thailand sales office and distribution |
August 2026 |
|||||
|
Seoul, Korea |
Korea sales office and distribution |
April 2027 |
|||||
|
Shanghai, China |
China sales office and distribution |
August 2024 |
|||||
|
Ballarat, Australia |
Supply facility |
|
December 2030 |
||||
Operating lease right-of-use (“ROU”) assets and operating lease liabilities are recognized based on the present value of the future lease minimum payments over the lease term at commencement date. Many of the lease agreements contain renewal or termination clauses that are factored into the determination of the lease term if it is reasonably certain that these options would be exercised. The Company recognizes lease expense for these leases on a straight-line basis over the lease term.
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, 2023.
The interest rate implicit in lease agreements is typically not readily determinable, and as such the Company used the incremental borrowing rate based on the information available at commencement date in determining the present value of future payments. The incremental borrowing rate is defined as the interest the Company would pay to borrow on a collateralized basis.
Additional information with respect to our leases is as follows:
|
Three months ended September 30, |
Nine months ended September 30, | |||||||||||||||
|
2023 |
2022 |
2023 |
2022 |
|||||||||||||
|
(in thousands) |
(in thousands) |
(in thousands) |
(in thousands) |
|||||||||||||
|
Lease cost |
||||||||||||||||
|
Operating lease cost |
$ | $ | $ | $ | ||||||||||||
|
Short-term lease cost |
||||||||||||||||
|
Total lease cost |
$ | $ | $ | $ | ||||||||||||
|
Other information |
||||||||||||||||
|
Cash paid for amounts included in the measurement of operating lease liabilities |
$ | $ | $ | $ | ||||||||||||
|
Right-of-use assets obtained in exchange for new operating lease liabilities |
$ | $ | $ | $ | ||||||||||||
|
Weighted average remaining lease term - operating leases (in years) |
||||||||||||||||
|
Weighted average discount rate - operating leases |
% | % | ||||||||||||||
The maturities of the lease liabilities for each of the following fiscal years is:
|
Remainder of 2023 |
$ | |||
|
Year ending December 31, |
||||
|
2024 |
||||
|
2025 |
||||
|
2026 |
||||
|
2027 |
||||
|
2028 |
||||
|
Thereafter |
||||
|
Adjustment to net present value as of September 30, 2023 |
( |
) | ||
|
Minimum noncancelable lease liability |
$ |
7. Accrued Expenses and Other Long-term Liabilities
Accrued expenses consist of the following:
|
September 30, 2023 |
December 31, 2022 |
|||||||
|
(in thousands) |
||||||||
|
Compensation and related taxes |
$ | $ | ||||||
|
Accrued purchases |
||||||||
|
Accrued expenses |
||||||||
|
Income and other taxes |
||||||||
|
Professional fees |
||||||||
|
Other |
||||||||
|
Total |
$ | $ | ||||||
Other long-term liabilities consist of the following:
|
September 30, 2023 |
December 31, 2022 |
|||||||
|
(in thousands) |
||||||||
|
Acquisition-related liabilities |
$ | $ | ||||||
|
Income taxes |
||||||||
|
Other |
||||||||
|
Total |
$ | $ | ||||||
8. 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 operating segment. No discrete operating information is prepared by us except for sales by product line and operations by legal entity for local purposes.
Most of our revenues are generated in the United States, Germany, the United Kingdom and other European countries and Canada. Substantially all of our assets are located in the United States and Germany. Net sales to unaffiliated customers by country were as follows:
|
Three months ended |
Nine months ended |
|||||||||||||||
|
September 30, |
September 30, |
|||||||||||||||
|
2023 |
2022 |
2023 |
2022 |
|||||||||||||
|
(in thousands) |
(in thousands) |
|||||||||||||||
|
United States |
$ | $ | $ | $ | ||||||||||||
|
Germany |
||||||||||||||||
|
Canada |
||||||||||||||||
|
United Kingdom |
||||||||||||||||
|
Other countries |
||||||||||||||||
|
Net Sales |
$ | $ | $ | $ | ||||||||||||
9. Share-based Compensation
Our Third Amended and Restated 2006 Stock Option and Incentive Plan allows for granting of incentive stock options, non-qualified stock options, stock appreciation rights, restricted stock units, performance-based restricted stock units, unrestricted stock awards, and deferred stock awards to our officers, employees, directors and consultants. The components of share-based compensation expense were as follows:
|
Three months ended |
Nine months ended |
|||||||||||||||
|
September 30, |
September 30, |
|||||||||||||||
|
2023 |
2022 |
2023 |
2022 |
|||||||||||||
|
(in thousands) |
(in thousands) |
|||||||||||||||
|
Stock option awards |
$ | $ | $ | $ | ||||||||||||
|
Restricted stock units |
||||||||||||||||
|
Performance-based restricted stock units |
||||||||||||||||
|
Total share-based compensation |
$ | $ | $ | $ | ||||||||||||
Stock-based compensation is included in our statements of operations as follows:
|
Three months ended |
Nine months ended |
|||||||||||||||
|
September 30, |
September 30, |
|||||||||||||||
|
2023 |
2022 |
2023 |
2022 |
|||||||||||||
|
(in thousands) |
(in thousands) |
|||||||||||||||
|
Cost of sales |
$ | $ | $ | $ | ||||||||||||
|
Sales and marketing |
||||||||||||||||
|
General and administrative |
||||||||||||||||
|
Research and development |
||||||||||||||||
|
Total stock-based compensation |
$ | $ | $ | $ | ||||||||||||
During the nine months ended September 30, 2023 and 2022, we granted options for the purchase of
10. Net Income per Share
The computation of basic and diluted net income per share was as follows:
|
Three months ended |
Nine months ended |
|||||||||||||||
|
September 30, |
September 30, |
|||||||||||||||
|
2023 |
2022 |
2023 |
2022 |
|||||||||||||
|
(in thousands, except per share data) |
(in thousands, except per share data) |
|||||||||||||||
|
Basic: |
||||||||||||||||
|
Net income available for common stockholders |
$ | $ | $ | $ | ||||||||||||
|
Weighted average shares outstanding |
||||||||||||||||
|
Basic earnings per share |
$ | $ | $ | $ | ||||||||||||
|
Diluted: |
||||||||||||||||
|
Net income available for common stockholders |
$ | $ | $ | $ | ||||||||||||
|
Weighted-average shares outstanding |
||||||||||||||||
|
Common stock equivalents, if dilutive |
||||||||||||||||
|
Shares used in computing diluted earnings per common share |
||||||||||||||||
|
Diluted earnings per share |
$ | $ | $ | $ | ||||||||||||
|
Shares excluded in computing diluted earnings per share as those shares would be anti-dilutive |
||||||||||||||||
11. Stockholders’ Equity
Share Repurchase Program
On February 21, 2023, our Board of Directors authorized the repurchase of up to $
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 2023 |
||||||||||
|
March 9, 2023 |
|
$ | $ | |||||||
|
May 17, 2023 |
|
$ | $ | |||||||
|
August 17, 2023 |
|
$ | $ | |||||||
|
Fiscal Year 2022 |
||||||||||
|
March 8, 2022 |
|
$ | $ | |||||||
|
May 17, 2022 |
|
$ | $ | |||||||
|
August 25, 2022 |
|
$ | $ | |||||||
|
November 17, 2022 |
|
$ | $ | |||||||
On October 24, 2023, our Board of Directors approved a quarterly cash dividend on our common stock of $
12. Supplemental Cash Flow Information
|
For the nine months ended |
||||||||
|
September 30, |
||||||||
|
2023 |
2022 |
|||||||
|
(in thousands) |
||||||||
|
Cash paid for income taxes, net |
$ | $ | ||||||
13. Fair Value Measurements
The fair value accounting guidance requires that assets and liabilities carried at fair value be classified and disclosed in one of the following three categories:
|
• |
Level 1 — Quoted prices in active markets for identical assets or liabilities. |
|
• |
Level 2 — Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data. |
|
• |
Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. This includes certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs. |
Level 1 assets being measured at fair value on a recurring basis as of September 30, 2023 included our short-term investment and short-duration bond mutual fund accounts.
We had no Level 2 assets being measured at fair value on a recurring basis as of September 30, 2023.
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. The agreement required us to make potential additional payments to Artegraft of up to $
During 2019, we recorded contingent liabilities associated with our acquisition of the Anteris (formerly Admedus) biologic patch business. The agreement includes the potential for us to pay up to $
In September 2023 the agreement was amended in order to (i) place a cap on the total amount of costs incurred by LeMaitre in achieving the CE marks under MDR regulations that could be used as a deduction toward the $
The following table provides a roll-forward 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:
|
Nine months ended September 30, |
||||||||
|
2023 |
2022 |
|||||||
|
(in thousands) |
||||||||
|
Beginning balance |
$ | $ | ||||||
|
Additions |
||||||||
|
Payments |
||||||||
|
Change in fair value included in earnings |
( |
) | ||||||
|
Ending balance |
$ | $ | ||||||
14. Accumulated Other Comprehensive Loss
Changes to our accumulated other comprehensive loss for the nine months ended September 30, 2023 and 2022 consisted primarily of foreign currency translation and unrealized losses on short-term marketable securities:
|
Nine months ended |
||||||||
|
September 30, |
||||||||
|
2023 |
2022 |
|||||||
|
(in thousands) |
||||||||
|
Beginning balance |
$ | ( |
) | $ | ( |
) | ||
|
Other comprehensive income (loss) before reclassifications |
( |
) | ( |
) | ||||
|
Ending Balance |
$ | ( |
) | $ | ( |
) | ||
15. Subsequent Events
In October 2023, we amended our lease agreements related to four of our five buildings in Burlington, Massachusetts, extending them for a period of four additional years to December 31, 2034. The Company has no option to extend or renew the leases beyond December 31, 2034. As of September 30, 2023, the expiration date was December 31, 2030. The foregoing description of the Amendments is not complete and is qualified in its entirety by reference to the full text of such documents attached as exhibits hereto.
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
This Quarterly Report on Form 10-Q 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; the risk that the Company is not successful in transitioning to a direct-selling model in new territories.
Forward-looking statements reflect management’s analysis as of the date of this quarterly report. Further information on potential risk factors that could affect our business and financial results is detailed in Part II, Item 1A, “Risk Factors” in this Quarterly Report on Form 10-Q and in our other filings with the Securities and Exchange Commission, including under the section headed “Risk Factors” in our most recent Annual Report on Form 10-K. Given these risks, uncertainties and other factors, you should not place undue reliance on these forward-looking statements. The following discussion and analysis should be read in conjunction with our consolidated financial statements and the related notes included in this report and our other SEC filings, including our audited consolidated financial statements and the related notes contained in our Annual Report on Form 10-K for the year ended December 31, 2022, as filed with the SEC on March 1, 2023. We do not assume any obligation to update any forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by law. Unless the context indicates otherwise, references to “LeMaitre Vascular,” “we,” “LeMaitre,” “our,” and “us” in this Quarterly Report on Form 10-Q refer to LeMaitre Vascular, Inc. and its subsidiaries.
LeMaitre, AlboGraft, AnastoClip, AnastoClip GC, Artegraft, Cardial, CardioCel, Dialine, Eze-Sit, Glow ‘N Tell, LeverEdge, LifeSpan, ProCol, Pruitt, Pruitt F3, Pruitt-Inahara, RestoreFlow, TufTex, VascuCel, VascuTape, Wovex and XenoSure are registered trademarks of LeMaitre Vascular or one of its subsidiaries, and Chevalier, DuraSure, Flexcel, Omniflow, PeriVu and Syntel are trademarks of LeMaitre Vascular. This Quarterly Report on Form 10-Q also includes the registered and unregistered trademarks of other persons, which are the property of their respective owners.
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. 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 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.
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.
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 Q3 2023, biologics represented 51% of our worldwide sales. We view our biologic device offerings favorably, as we believe they represent differentiated and in many cases growing product segments.
To assist us in evaluating our business strategies, we regularly monitor long-term technology trends in the peripheral vascular device market. Additionally, we consider the information obtained from discussions with the medical community in connection with the demand for our products, including potential new product launches. We also use this information to help determine our competitive position in the peripheral vascular device market and our manufacturing capacity requirements.
Our business opportunities include the following:
|
• |
growing our direct sales force in the United States, Europe, the United Kingdom, Canada and Asia Pacific, including replacing distributors with our direct sales personnel; |
|
|
|
||
|
• |
increasing the average selling prices of our devices; |
|
• |
adding complementary products through acquisitions; |
|
|
|
||
|
• |
introducing our products into new territories upon receipt of regulatory approvals or registrations; |
|
|
|
||
|
• |
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 September 30, 2023, our sales force was comprised of 136 sales representatives in North America, Europe and Asia Pacific, including three 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; Hereford, England; and Dublin, Ireland. Our Asia Pacific headquarters is located in Singapore, and we also have sales offices in Tokyo, Japan; Shanghai, China; Kensington, Australia; Seoul, Korea; and Bangkok, Thailand. During the current quarter, approximately 95% of our net sales were generated in countries 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 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 than in North America. 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 Anteris to purchase the assets of their CardioCel biologic patch business for $15.5 million plus additional payments of up to $7.8 million, depending upon the satisfaction of certain contingencies. |
|
|
|
||
|
• |
In June 2020, we entered into an agreement with Artegraft to purchase the assets of their bovine graft business for $72.5 million plus additional payments of up to $17.5 million, depending upon 2021 – 2023 unit sales. |
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 TRIVEX powered phlebectomy systems, remote endarterectomy devices and surgical glue. These products totaled approximately $2.2 million in 2021 revenues. |
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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 $0.7 million in 2022 revenues. |
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• |
During 2023, we made the decision to discontinue the sales of AlboGraft and LifeSpan synthetic graft product lines in the United States. These products totaled approximately $0.2 million and less than $0.1 million, respectively, in 2022 revenues. |
From time to time we may undertake SKU reductions or transition sales to other SKUs or products with similar features. For example, in 2022, we initiated the transition of sales of our Syntel spring tip catheter to our legacy 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:
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• |
During 2020, we entered into definitive agreements with, or participated with Anteris in concluding agreements with, several former Anteris distributors in Europe and Canada, in order to terminate their distribution of the acquired bovine cardiac and vascular patch products, and we began selling direct-to-hospital in those geographies. The distribution termination fees totaled approximately $0.1 million. |
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• |
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 U.S. |
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• |
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 have been selling direct-to-hospital in Korea since December 2022. The distribution termination fees totaled approximately $0.5 million. |
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• |
In March 2023, we entered into a distribution transition agreement with our Thailand distributor in order to sell products directly in Thailand and dissolve the existing distribution arrangement. The distribution termination fees will total approximately $0.7 million. We began selling direct-to-hospital in Thailand in Q3 2023. |
We also rely, to a lesser extent, on internal development efforts to bring differentiated technology and next-generation products and services to market:
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• |
In 2020, we launched RestoreFlow cardiac allografts for use in cardiac repair and restoration. |
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• |
In March 2022, we received U.S. FDA clearance to market PhasTIPP, a portable powered phlebotomy device used to remove varicose veins in the leg. We expect to launch this product in 2024. |
In addition to our sales growth strategies, we have also executed on 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:
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• |
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 CE mark approval to sell these Burlington produced devices in Europe in June 2022. This transfer was completed in 2023. |
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• |
In October 2019, we acquired the CardioCel biologic patch business from Anteris. In July 2020, we initiated a project to transfer the production of these devices to our Burlington facilities. We expect these transfer activities to be substantially complete in 2023. In June 2023, the MDR CE mark application to market these Burlington produced devices was submitted, and we anticipate this application process to take 18-24 months. |
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• |
In June 2018, we acquired the Cardial business from Becton Dickinson. Cardial manufactured polyester vascular grafts, valvulotomes and surgical glue at its St. Etienne, France facility. In June 2022, we closed the St. Etienne factory in order to streamline manufacturing operations and to reduce expenses. We are transitioning Cardial graft sales to our Burlington-manufactured polyester vascular graft product (AlboGraft) for additional cost savings and improved margins. |
Finally, from time to time we may enter into distribution agreements of complementary product lines with the option to acquire the product line in the future.
|
• |
In April 2023, we entered into an agreement with Aziyo Biologics, Inc. to become the exclusive U.S. distributor of their cardiovascular porcine patches. Under the agreement, we will distribute the products for three years with an option to acquire Aziyo’s worldwide cardiovascular patch business during the second and third year of the agreement. Sales for the nine months ended September 30, 2023 were $2.6 million. |
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 expenses such as process engineering and other charges.
In 2024, we expect to implement a new Enterprise Resource Planning (“ERP”) system to replace our current software reporting and planning system. We expect that the new ERP system will be beneficial in a number of areas, including inventory management, pricing programs, financial operations and real time reporting. While we have been preparing for this transition since 2022, and have hired an experienced consulting team to assist us in this transition, there can be no assurances that the implementation will be successful or executed in a timely fashion. We expect to spend approximately $7.0 million on this implementation.
Fluctuations in the exchange rates between the U.S. dollar and foreign currencies, primarily the Euro, affect our financial results. For the nine months ended September 30, 2023, 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 the nine months ended September 30, 2023, we estimate that the effects of changes in foreign exchange rates decreased our reported sales by approximately $0.3 million, as compared to rates in effect for the nine months ended September 30, 2022.
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 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 and cardiac congresses, training programs, advertising and product promotions, direct mail and other marketing costs.
General and administrative. General and administrative expense consists primarily of executive, finance and human resource salaries, stock-based compensation, legal and accounting fees, information technology expense, intangible asset amortization expense and insurance expense.
Research and development. Research and development expense 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
Comparison of the three- and nine-month periods ended September 30, 2023 to the three- and nine-month periods ended September 30, 2022:
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:
|
Three months ended September 30, |
Nine months ended September 30, |
|||||||||||||||||||||||
|
(unaudited) |
Percent |
Percent |
||||||||||||||||||||||
|
2023 |
2022 |
change |
2023 |
2022 |
change |
|||||||||||||||||||
|
($ in thousands) |
($ in thousands) |
|||||||||||||||||||||||
|
Net sales |
$ | 47,411 | $ | 39,028 | 21 | % | $ | 144,601 | $ | 120,697 | 20 | % | ||||||||||||
|
Net sales by geography: |
||||||||||||||||||||||||
|
Americas |
$ | 31,863 | $ | 26,627 | 20 | % | $ | 97,496 | $ | 82,024 | 19 | % | ||||||||||||
|
Europe, Middle East and Africa |
12,322 | 9,922 | 24 | % | 38,179 | 31,165 | 23 | % | ||||||||||||||||
|
Asia Pacific |
3,226 | 2,479 | 30 | % | 8,926 | 7,508 | 19 | % | ||||||||||||||||
|
Total |
$ | 47,411 | $ | 39,028 | 21 | % | $ | 144,601 | $ | 120,697 | 20 | % | ||||||||||||
Net sales. Net sales increased by $8.4 million, or 21%, to $47.4 million for the three months ended September 30, 2023, compared to $39.0 million for the three months ended September 30, 2022. The increase was driven primarily by elevated hospital procedure volumes, higher average selling prices, additional sales representatives, and $1.3 million in sales related to our new porcine patch product line. Valvulotome sales increased $1.8 million, bovine vascular patch sales increased $1.2 million and bovine graft sales increased $1.0 million. We estimate that the weaker U.S. dollar increased net sales by $0.7 million during the three months ended September 30, 2023 as compared to the three months ended September 30, 2022.
Net sales increased by $23.9 million, or 20%, to $144.6 million for the nine months ended September 30, 2023, compared to $120.7 million for the nine months ended September 30, 2022. The increase was driven primarily by elevated hospital procedure volumes, higher average selling prices, additional sales representatives, and $2.6 million in sales related to our new porcine patch product line. Valvulotome sales increased $5.3 million, bovine graft sales increased $3.5 million, and bovine vascular patch sales increased $3.4 million. We estimate that the stronger U.S. dollar decreased net sales by $0.3 million during the nine months ended September 30, 2023 as compared to the nine months ended September 30, 2022.
Direct-to-hospital net sales were 96% of our total net sales for the nine months ended September 30, 2023 and 2022.
Net sales by geography. Net sales in the Americas increased $5.2 million, or 20%, for the three months ended September 30, 2023 as compared to the three months ended September 30, 2022. The increase was driven primarily by increased sales of valvulotomes of $1.3 million, porcine patches of $1.3 million, bovine grafts of $1.0 million, and bovine vascular patches of $0.5 million.
Net sales in the Americas increased $15.5 million, or 19%, for the nine months ended September 30, 2023 as compared to the nine months ended September 30, 2022. The increase was driven primarily by increased sales of valvulotomes of $4.4 million, bovine grafts of $3.5 million, porcine patches of $2.6 million, allograft preservation services of $1.6 million, and bovine vascular patches of $1.4 million.
EMEA net sales increased $2.4 million, or 24%, for the three months ended September 30, 2023 as compared to the three months ended September 30, 2022. The increase was driven primarily by increased sales of bovine vascular patches of $0.6 million, valvulotomes of $0.5 million, carotid shunts of $0.4 million, and bovine cardiac patches of $0.4 million.
EMEA net sales increased $7.0 million, or 23%, for the nine months ended September 30, 2023 as compared to the nine months ended September 30, 2022. The increase was driven primarily by increased sales of bovine vascular patches of $1.6 million, carotid shunts of $1.5 million, valvulotomes of $0.9 million, and bovine cardiac patches of $0.9 million.
Asia Pacific net sales increased $0.7 million, or 30%, for the three months ended September 30, 2023 as compared to the three months ended September 30, 2022. The increase was driven primarily by increased sales of over-the-wire embolectomy catheters of $0.2 million and occlusion catheters, bovine cardiac patches and bovine vascular patches of $0.1 million, respectively.
Asia Pacific net sales increased $1.4 million, or 19%, for the nine months ended September 30, 2023 as compared to the nine months ended September 30, 2022. The increase was driven primarily by increased sales of bovine vascular patches and occlusions catheters of $0.4 million, respectively, and over-the-wire embolectomy catheters and bovine cardiac patches of $0.2 million, respectively.
The following table sets forth the change in our gross profit and gross margin for the periods indicated:
|
Three months ended September 30, |
Nine months ended September 30, |
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(unaudited) |
Percent |
Percent |
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|
2023 |
2022 |
Change |
change |
2023 |
2022 |
Change |
change |
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($ in thousands) |
($ in thousands) |
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Gross profit |
$ | 30,815 | $ | 25,070 | $ | 5,745 | 23 | % | $ | 93,784 | $ | 78,842 | $ | 14,942 | 19 | % | ||||||||||||||||
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Gross margin |
65.0 | % | 64.2 | % | 0.8 | % | * | 64.9 | % | 65.3 | % | (0.5% | ) | * | ||||||||||||||||||
*Not applicable
Gross Profit. Gross profit increased $5.7 million, or 23%, to $30.8 million for the three months ended September 30, 2023, and gross margin increased 80 basis points to 65% in the period. The increase in gross profit was driven primarily by increased sales, particularly from valvulotomes, porcine patches, bovine vascular patches and bovine grafts. The increase in gross margin was driven primarily by favorable product mix, including sales of comparatively higher margin valvulotomes, and manufacturing efficiencies, which were partially offset by increased scrap and excess and obsolescence charges.
Gross profit increased $14.9 million, or 19%, to $93.8 million for the nine months ended September 30, 2023, and gross margin decreased 50 basis points to 64.9% in the period. The increase in gross profit was driven primarily by increased sales, particularly from valvulotomes, bovine grafts and bovine vascular patches. The decrease in gross margin was driven primarily by increases in labor costs, unfavorable product mix, including sales of comparatively lower margin porcine patches and sales of our allograft preservation services, and increased scrap and excess and obsolescence charges.
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:
|
Three months ended September 30, |
Nine months ended September 30, |
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|
(unaudited) |
Percent |
Percent |
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|
2023 |
2022 |
$ Change |
change |
2023 |
2022 |
$ Change |
change |
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|
Sales and marketing |
$ | 9,673 | $ | 8,229 | $ | 1,444 | 18 | % | $ | 30,786 | $ | 24,321 | $ | 6,465 | 27 | % | ||||||||||||||||
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General and administrative |
7,738 | 7,229 | 509 | 7 | % | 23,392 | 21,812 | 1,580 | 7 | % | ||||||||||||||||||||||
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Research and development |
4,224 | 3,462 | 762 | 22 | % | 12,615 | 9,740 | 2,875 | 30 | % | ||||||||||||||||||||||
|
Restructuring |
- | - | - | * | 485 | 3,107 | (2,622 | ) | (84 | )% | ||||||||||||||||||||||
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Total |
$ | 21,635 | $ | 18,920 | $ | 2,715 | 14 | % | $ | 67,278 | $ | 58,980 | $ | 8,298 | 14 | % | ||||||||||||||||
|
Three months ended September 30, |
Nine months ended September 30, |
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|
2023 |
2022 |
2023 |
2022 |
|||||||||||||||||||||
|
% of Net Sales |
% of Net Sales |
Change |
% of Net Sales |
% of Net Sales |
Change |
|||||||||||||||||||
|
Sales and marketing |
20 | % | 21 | % | (1 | %) | 21 | % | 20 | % | 1 | % | ||||||||||||
|
General and administrative |
16 | % | 19 | % | (3 | %) | 16 | % | 18 | % | (2 | %) | ||||||||||||
|
Research and development |
9 | % | 9 | % | 0 | % | 9 | % | 8 | % | 1 | % | ||||||||||||
|
Restructuring |
0 | % | 0 | % | 0 | % | 0 | % | 3 | % | (3 | %) | ||||||||||||
* Not a meaningful percentage relationship.
Sales and marketing. For the three months ended September 30, 2023, sales and marketing expenses increased 18% to $9.7 million. The increase was driven primarily by higher sales rep headcount and higher sales commissions, which resulted in increased compensation and related expenses of $1.4 million. Travel, training and related expenses increased by $0.1 million. Sales rep headcount was 136 as of September 30, 2023, a 15% increase from September 30, 2022. As a percentage of net sales, sales and marketing expense decreased to 20% for the three months ended September 30, 2023, down from 21% in the prior period.
For the nine months ended September 30, 2023, sales and marketing expenses increased 27% to $30.8 million. The increase was driven primarily by higher sales rep headcount and higher sales commissions, which resulted in increased compensation and related expenses of $5.3 million. Travel, training and related expenses increased by $0.6 million. As a percentage of net sales, sales and marketing expense increased to 21% for the nine months ended September 30, 2023, up from 20% in the prior period.
General and administrative. For the three months ended September 30, 2023, general and administrative expenses increased 7% to $7.7 million. The increase was driven primarily by higher outside services and professional fees of $1.0 million, which were partially offset by lower compensation and related expenses of $0.2 million, facility fees of $0.1 million, and acquisition costs of $0.1 million. Lower acquisition costs were driven by gains related to the amendment of a contingent purchase obligation associated with our 2019 Anteris biologic patch acquisition. As a percentage of sales, general and administrative expense decreased to 16% for the three months ended September 30, 2023, down from 19% in the prior period.
For the nine months ended September 30, 2023, general and administrative expenses increased 7% to $23.4 million. The increase was driven primarily by higher compensation and related expenses of $1.1 million. Travel, training and related expenses increased by $0.2 million. As a percentage of sales, general and administrative expense decreased to 16% for the nine months ended September 30, 2023, down from 18% in the prior period.
Research and development. For the three months ended September 30, 2023, research and development expenses increased 22% to $4.2 million. The increase was driven by higher compensation and related expenses of $0.4 million. Outside services and testing increased by $0.3 million primarily due to higher consulting and third-party costs largely 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 EU 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, research and development expense was unchanged at 9% for the three months ended September 30, 2023.
For the nine months ended September 30, 2023, research and development expense increased 30% to $12.6 million. The increase was driven by higher compensation and related expenses of $1.1 million. Outside services and testing increased by $1.5 million primarily due to higher consulting and third-party costs largely associated with European regulatory approvals. As a percentage of sales, research and development expense increased to 9% for the nine months ended September 30, 2023, up from 8% in the prior period.
Restructuring. For the nine months ended September 30, 2023, restructuring expenses were $0.5 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. These charges consisted primarily of employment termination costs, impairment of fixed assets and inventory, and third-party costs. For the nine months ended September 30, 2023 we recorded additional restructuring charges in conjunction with the St. Etienne, France factory closure of $0.5 million. The additional charges consisted primarily of employment termination, settlement, legal and other third-party costs. As a percentage of sales, restructuring expense was less than 1% for the nine months ended September 30, 2023. There was no restructuring charges for the three months ended September 30, 2023.
Income tax expense. We recorded a tax provision of $2.3 million on pre-tax income of $9.8 million for the three months ended September 30, 2023, compared to a $0.7 million tax provision on pre-tax income of $6.1 million for the three months ended September 30, 2022. We recorded a tax provision of $6.5 million on pre-tax income of $28.2 million for the nine months ended September 30, 2023, compared to a tax provision of $4.7 million on pre-tax income of $19.7 million for the nine months ended September 30, 2022. Our effective income tax rate was 23.6% and 23.1% for the three- and nine-month periods ended September 30, 2023. Our tax expense for the current period is based on an estimated annual effective tax rate of 24.9%, adjusted in the applicable quarterly periods for discrete stock option exercises and other discrete items. Our income tax expense for the current period varies from the statutory rate mainly due to the generation of 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 11.3% and 23.8% for the three- and nine-month periods ended September 30, 2022. Our 2022 provision was based on the estimated annual effective tax rate of 25.1%, adjusted in the applicable quarterly period for discrete stock option exercises and other discrete items. Our income tax expense for the three-and nine-month periods ended September 30, 2022 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 that we believe is more likely than not to be realized. As of September 30, 2023, 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 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.
Liquidity and Capital Resources
As of September 30, 2023, our cash and cash equivalents were $18.1 million as compared to $19.1 million as of December 31, 2022. We had $79.0 million in short-term marketable securities as of September 30, 2023 and $63.6 million as of December 31, 2022. Our cash and cash equivalents are 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. As of September 30, 2023 our short-term marketable securities reflected an unrealized loss of $2.0 million as a result of increasing market interest rates.
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.
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 $26.5 million for the nine months ended September 30, 2023. For the year ended December 31, 2022, we had operating income of $26.8 million. We expect to fund any increased costs and expenditures from our existing cash and cash equivalents, though our future capital requirements depend on numerous factors. These factors include, but are not limited to, the following:
|
• |
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; |
|
• |
costs associated with expanding our manufacturing, marketing, sales, and distribution efforts; |
|
• |
costs associated with our initiatives to sell direct-to-hospital in new countries; |
|
• |
costs of obtaining and maintaining U.S. FDA and other regulatory clearances for our existing and future products; |
|
• |
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.
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 2023 |
||||||||||
|
March 9, 2023 |
March 23, 2023 |
$ | 0.140 | $ | 3,099 | |||||
|
May 17, 2023 |
June 1, 2023 |
$ | 0.140 | $ | 3,116 | |||||
|
August 17, 2023 |
August 31, 2023 |
$ | 0.140 | $ | 3,117 | |||||
|
Fiscal Year 2022 |
||||||||||
|
March 8, 2022 |
March 24, 2022 |
$ | 0.125 | $ | 2,743 | |||||
|
May 17, 2022 |
June 2, 2022 |
$ | 0.125 | $ | 2,745 | |||||
|
August 25, 2022 |
September 8, 2022 |
$ | 0.125 | $ | 2,750 | |||||
|
November 17, 2022 |
December 1, 2022 |
$ | 0.125 | $ | 2,750 | |||||
On October 24, 2023, our Board of Directors approved a quarterly cash dividend on our common stock of $0.14 per share payable on November 30, 2023, to stockholders of record at the close of business on November 16, 2023.
Cash Flows
|
Nine months ended September 30, |
||||||||||||
|
(in thousands) |
||||||||||||
|
2023 |
2022 |
Net Change |
||||||||||
|
Cash and cash equivalents |
$ | 18,051 | $ | 16,913 | $ | 1,138 | ||||||
|
Cash flows provided by (used in): |
||||||||||||
|
Operating activities |
$ | 26,005 | $ | 21,301 | $ | 4,704 | ||||||
|
Investing activities |
(22,454 | ) | (9,969 | ) | (12,485 | ) | ||||||
|
Financing activities |
(4,445 | ) | (7,112 | ) | 2,667 | |||||||
Net cash provided by operating activities. Net cash provided by operating activities was $26.0 million for the nine months ended September 30, 2023, consisting of $21.6 million in net income, adjustments for non-cash or non-operating items of $12.9 million (including primarily depreciation and amortization of $7.1 million, stock-based compensation of $3.9 million, provisions for inventory write-offs and doubtful accounts of $1.5 million and loss on divestiture of $0.5 million), and also a net use of working capital of $8.6 million. The net cash used for working capital was driven by an increase in accounts receivable of $2.1 million, an increase in inventory and other deferred costs of $7.6 million, and an increase in prepaid expenses and other assets of $1.2 million. These cash uses were offset by an increase in accounts payable and other liabilities of $2.3 million.
Net cash provided by operating activities was $21.3 million for the nine months ended September 30, 2022, consisting of $15.0 million in net income, adjustments for non-cash or non-operating items of $14.2 million (including primarily depreciation and amortization of $7.1 million, stock-based compensation of $3.5 million, provisions for inventory write-offs and doubtful accounts of $2.3 million, and loss on divestiture of $1.4 million), and also a net use of working capital of $7.9 million. The net cash used for working capital was driven by an increase in inventory and other deferred costs of $5.0 million, an increase in accounts receivable of $1.7 million, and an increase in prepaid expenses and other assets of $1.3 million. These cash uses were offset by an increase in accounts payable and other liabilities of $0.2 million.
Net cash used in investing activities. Net cash used in investing activities was $22.5 million for the nine months ended September 30, 2023, consisting of purchases of marketable securities of $15.6 million, expenditures on equipment and technology of $6.0 million, and acquisition related payments of $0.9 million.
Net cash used in investing activities was $10.0 million for the nine months ended September 30, 2022, consisting of purchases of marketable securities of $8.0 million and expenditures on equipment and technology of $2.0 million.
Net cash used in financing activities. Net cash used in financing activities was $4.4 million for the nine months ended September 30, 2023, consisting primarily of a dividend payment of $9.3 million. This use of cash was partly offset by proceeds from stock option exercises of $4.9 million, net of shares repurchased used to pay employee payroll taxes.
Net cash used in financing activities was $7.1 million for the nine months ended September 30, 2022, consisting primarily of a dividend payment of $8.2 million and deferred payments for acquisitions of $0.4 million. This use of cash was partly offset by proceeds from stock option exercises of $1.5 million, net of shares repurchased to cover employee payroll taxes.
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, or U.S. GAAP. Our most significant accounting policies are described in Note 1 to our consolidated financial statements included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022. There have been no material changes in our critical accounting policies during the nine months ended September 30, 2023. The preparation of our consolidated financial statements in conformity with U.S. 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 may differ from those estimates.
Recent Accounting Pronouncements
A summary of recent accounting pronouncements that may impact our financial statements upon adoption in future periods can be found in Note 1 to our financial statements included under Part 1, Item 1 of this Quarterly Report on Form 10-Q.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
In the ordinary course of conducting business, we are exposed to certain risks associated with potential changes in market conditions. These market risks include changes in currency exchange rates and interest rates which could affect operating results, financial position and cash flows. We manage our exposure to these market risks through our regular operating and financing activities and, if considered appropriate, we may enter into derivative financial instruments such as forward currency exchange contracts, although we have not done so in 2023 or in recent years. There have been no material changes in our quantitative and qualitative market risks since the disclosure in our Annual Report on Form 10-K for the year ended December 31, 2022.
Item 4. 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 September 30, 2023 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.
Changes in Internal Control
There have been no changes in our internal control over financial reporting for the nine months ended September 30, 2023 that have materially affected, or are 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 a 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 is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any system 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.
In the ordinary course of business, we are from time to time involved in lawsuits, claims, investigations, proceedings, and threats of litigation relating to employment, product liability, commercial arrangements, contracts, intellectual property and other matters. While the outcome of these proceedings and claims cannot be predicted with certainty, there are no matters, as of November 7, 2023 that management believes would have a material adverse effect on our financial position, results of operations or cash flows.
In addition to the information set forth in this report, you should consider the risks and uncertainties discussed in “Part I, Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2022, which could materially affect our business, financial condition, or future results. The risk factors below supplement and update the risk factors and information discussed in our Annual Report on Form 10-K for the year ended December 31, 2022.
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 positioned 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.
Other companies that may not be deemed competitors in the peripheral vascular device space in which we operate may develop technologies, products or services that may adversely impact the use of our products and services. For example, certain therapeutic treatments, such as drugs used to treat diabetes or help with weight loss, may enhance patient health and lower the occurrence and severity of the vascular diseases that certain of our products and services are intended to treat. If we do not introduce new products, services and enhancements in a timely manner, there may be a decrease in the use of certain of our products and services by vascular surgeons, in which case our revenues and operating results would suffer.
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 U.S. are subject to international regulatory requirements that vary from country to country. These requirements and the amount of time required for approval may differ from our experiences with the U.S. FDA. In some 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 Carotid Shunt.
In April 2017, the EU adopted new regulations for medical devices, the MDR, which replace the MDD and which started to take effect as of May 26, 2021. The final deadline for compliance with MDR was initially set to May 26, 2024, and subsequently revised to December 31, 2027 and December 31, 2028 for certain classifications of medical devices. 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 MDR CE mark issued in January 2023 for our Pruitt F3 Carotid Shunt, we were unable to secure the new CE marking for the polyurethane balloon models (F3-S). While the MDD CE mark remains valid for the F3-S, we will be required to incur more expenses to gain MDR CE marking for those models. The F3-S models accounted for approximately $53,000 of annual sales in Europe and the U.K. in 2022. 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 U.K.’s exit from the EU, the U.K. Medicines and Healthcare Products Regulatory Agency (“MHRA”) 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. This deadline was subsequently revised by MHRA to coincide with the EU extensions ending in December 31, 2027 and December 31, 2028. Following such dates, 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 these deadlines, or at all, our sales in the U.K. could be negatively affected.
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.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Recent Sales of Unregistered Securities
None.
Issuer Purchases of Equity Securities
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July 1, 2023 through July 31, 2023 |
- | $ | - | N/A | N/A | |||||||||||
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August 1, 2023 through August 31, 2023 |
87 | $ | 55.82 | N/A | N/A | |||||||||||
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September 1, 2023 through September 30, 2023 |
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87 | $ | 55.82 | N/A | N/A | |||||||||||
(1) For the three months ended September 30, 2023, we repurchased 87 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.
Rule 10b5-1 and non-Rule 10b5-1 trading arrangements
During the fiscal quarter ended September 30, 2023, of our directors or officers informed us of the adoption, modification or termination of a Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement, as those terms are defined in Regulation S-K, Item 408.
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Indicates a management contract or any compensatory plan, contract, or arrangement. |
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* |
The certifications attached as Exhibit 32.1 and Exhibit 32.2 that accompany this Quarterly Report on Form 10-Q, are not deemed filed with the SEC 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 Quarterly Report on Form 10-Q, irrespective of any general incorporation language contained in such filing. |
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on November 7, 2023.
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LEMAITRE VASCULAR, INC. |
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/s/ George W. LeMaitre |
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George W. LeMaitre |
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Chairman and Chief Executive Officer |
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/s/ Joseph P. Pellegrino, Jr. |
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Joseph P. Pellegrino, Jr. |
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Chief Financial Officer and Director |
Exhibit 10.1
FIRST AMENDMENT OF LEASE
THIS FIRST AMENDMENT OF LEASE (this “Amendment”) is made and entered into as of this 18th day of October, 2023 (the “Effective Date”) by and between NWP RETAIL 18 LLC, a Massachusetts limited liability company (“Landlord”) and LEMAITRE VASCULAR, INC., a Massachusetts corporation (“Tenant”).
BACKGROUND
A. Landlord and Tenant originally entered into a lease dated November 26, 2019 (the "Lease") with respect to the entire building measuring approximately 26,447 rentable square feet (the "Building") located at 32-34 Third Avenue, Northwest Park, Burlington, MA; and
B. Pursuant to the Lease, the current Expiration Date is December 31, 2030.
C. The parties now desire to extend the term of the lease for a period of four (4) additional years, to expire on December 31, 2034, and provide for certain other modifications to the Lease on account of such extension.
NOW THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereby amend the Lease as follows:
1. Capitalized terms not defined in this Amendment shall have the meanings given them in the Lease. The background recitals set forth above are hereby incorporated herein.
2. The Term of the Lease is hereby extended for an additional period of four (4) years from its current expiration date of December 31, 2030, such extension period commencing on January 1, 2031 and expiring on December 31, 2034 (the “First Extended Term”), subject to the terms of the Lease. Accordingly, as of the Effective Date, the Expiration Date stated in Section 1.1 of the Lease is changed to December 31, 2034. The First Extended Term shall be on all the same terms and conditions contained in the Lease, as hereby amended. Tenant is currently in possession of the Premises and accepts them in their current as-is condition for the First Extended Term without any representations or warranties by Landlord as to their condition, and without any obligation on the part of Landlord to perform any work to prepare the Premises for Tenant’s continued use. Notwithstanding anything to the contrary contained in the Lease, the parties confirm Tenant has no option to extend or renew the Term of the Lease beyond the expiration of the First Extended Term.
3. Throughout the First Extended Term, the Annual Fixed Rent Rate and the Monthly Fixed Rent Rate shall be calculated as follows:
A. Effective as of January 1, 2031, the Annual Fixed Rent Rate shall be adjusted to an amount equal to the greater of (i) the Annual Fixed Rent Rate last in effect, or (ii) the product of the $495,881.24 (i.e., $18.75/rsf multiplied by the Rentable Floor Area of the Premises) multiplied by a fraction, the numerator of which shall equal the Consumer Price Index for All Urban Consumers (CPI-U), Not Seasonally Adjusted, Boston-Cambridge-Newton, MA-NH All Items (1982-1984=100), as published by the Bureau of Labor Statistics of the United States Department of Labor (the “CPI”)1, for November of the year 2030 (or, if not available, as published for the prior month closest to November, 2030) and the denominator of which shall consist of the CPI as published for September of the year 2023 (or, if not available, as published for the prior month closest to September, 2023), with the Increase (as the term is defined below), and only such Increase, then being discounted by twenty-five percent (25%). As used in this paragraph 3, the term “Increase” means the percentage increase in the CPI between the two comparison years used in the applicable calculation under this Section 3. By way of example only, in connection with the calculation set forth above in this subparagraph A, if the CPI for September 2023 was 325.0 and the CPI for November 2030 was 357.5, then the Increase would be ten percent (10%).
B. Effective as of January 1, 2032, and annually thereafter (i.e. January 1, 2033 and January 1, 2034), the Annual Fixed Rent Rate shall be adjusted to be an amount equal to the greater of (i) the Annual Fixed Rent Rate last in effect, or (ii) the product of the Annual Fixed Rent Rate last in effect multiplied by a fraction, the numerator of which shall equal the CPI for November of the prior year (or, if not available, as published for the prior month closest ] to November of the prior year) and the denominator of which shall consist of the CPI as published for November of the year two (2) years’ prior (or, if not available, as published for the prior month closest to November the year two (2) years’ prior), with the Increase, and only such Increase, then being discounted by twenty-five percent (25%).
By way of example only, if the CPI for September 2023 was 325.0 and the CPI for November 2030 was 357.5, then the Annual Fixed Rent for the period of time from January 1, 2031 to December 31, 2031 would be $533,072.34, as determined by performing the following calculations:
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September 2023 CPI |
325.0 |
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November 2030 CPI |
357.5 |
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Increase |
10.00% |
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Increase discounted by 25% |
7.5% |
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$495,881.24 x 1.075 (i.e., 7.5% increase) |
$533,072.34 |
Once determined, Tenant shall pay the adjusted amount of the Annual Fixed Rent Rate through the remainder of each applicable calendar year of the First Extended Term. For any part of the First Extended Term during which the Fixed Rent Rate has not yet been finally determined, Tenant shall make payments to Landlord on account of Fixed Rent at the rate per square foot of Rentable Floor Area of the Premises last paid under the Lease. The parties shall adjust for any underpayment upon final determination of such rent. If the aforesaid Consumer Price Index is not in existence at the time of the adjustment, the parties shall use such equivalent price index as is published by any successor governmental agency in lieu of the Consumer Price Index, or by such nongovernmental agency as may then be publishing such an equivalent price index.
1 As of the Effective Date, such CPI can be found at: https://www.bls.gov/regions/northeast/data/consumerpriceindex boston table.htm
Fixed Rent and Additional Rent on account of Tenant’s Percentage of Taxes and Operating Costs shall continue to be paid at the same time and in the same manner as currently set forth in Article 4 of the Lease.
4. Tenant represents to Landlord it has dealt with no broker in connection with this Amendment, and in the event of any claims for commissions against Landlord by any broker predicated upon prior dealings with Tenant, Tenant agrees to defend the same and indemnify and hold harmless Landlord against any such claims.
5. Tenant represents and warrants to Landlord that, to the best of Tenant’s actual knowledge, as of the date hereof, (a) the Lease is and remains in good standing and in full force and effect, (b) Tenant has no claims, defenses, counterclaims, set-offs or defenses against Landlord arising out of the Lease or in any way relating thereto or arising out of any other transaction between Landlord and Tenant, and (c) all allowances provided to Tenant, have been paid in full by Landlord to Tenant, and Landlord has no further obligations with respect thereto or to the construction of the Premises.
6. Landlord and Tenant each represent, as to itself, (a) that it is validly existing and in good standing in the state where it was organized; (b) that it has the authority and capacity to enter into this Amendment and perform all of its obligations hereunder; (c) that all necessary action has been taken in order to authorize it to enter into and perform all of its obligations hereunder; and (d) that the person executing this Amendment on its behalf is duly authorized to do so.
7. This Amendment contains the entire agreement of the parties regarding the subject matter hereof. There are no promises, agreements, conditions, undertakings, warranties or representations, oral or written, express or implied, among them, relating to this subject matter, other than as set forth herein.
8. This Amendment shall not be valid and binding until executed and delivered by Landlord, and may be executed in identical counterparts, each of which shall be deemed an original and all of which, when taken together, shall constitute one and the same instrument. Any facsimile, transmittal by PDF or other means of electronic transmittal of original signature versions of this Amendment shall be considered to have the same legal effect as execution and delivery of the original document. The parties agree that execution of this Amendment by means of DocuSign is acceptable and shall be valid and binding, having the same legal effect as execution with original wet signatures, and shall be treated in all respects as the original document.
9. This Amendment shall be construed under the laws of the Commonwealth of Massachusetts and shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and assigns.
10. From and after the date of this Amendment all references to the “Lease” shall mean the Lease, as amended by this Amendment.
Signatures appear on the following page
Except as amended hereby, the Lease is ratified and confirmed in all respects, and shall continue in full force and effect according to its terms, as amended.
Executed under seal as of the Effective Date.
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LANDLORD: |
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NWP RETAIL 18 LLC, a Massachusetts limited liability company
By: NWP Retail LLC, a Massachusetts limited liability company
By: NWP Capital LLC, a Massachusetts limited liability company, its Sole Member and Authorized Signatory
By: NDC Asset Manager LLC
By: /s/ Peter Nordblom Name: Peter Nordblom
By: /s/ Crosby Nordblom Name: Crosby Nordblom |
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TENANT: |
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LEMAITRE VASCULAR, INC. |
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By: |
/s/ George W. LeMaitre |
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Name: |
George W. LeMaitre |
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Title: |
CEO & Chairman |
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Exhibit 10.2
SECOND AMENDMENT OF LEASE
THIS SECOND AMENDMENT OF LEASE (this “Amendment”) is made and entered into as of this 18th day of October, 2023 (the “Effective Date”) by and between NWP BUILDING 3 LLC, a Massachusetts limited liability company (“Landlord”) and LEMAITRE VASCULAR, INC., a Massachusetts corporation (“Tenant”).
BACKGROUND
A. Landlord's predecessor-in-interest, the trustee of N.W. Building 3 Trust, and Tenant originally entered into a lease dated December 20, 2013, as amended by a First Amendment of Lease dated October 29, 2019 (as amended, the "Lease") with respect to the entire building measuring approximately 15,642 rentable square feet (the "Building") located at 43 Second Avenue (formerly known as 41 Second Avenue), Northwest Park, Burlington, MA; and
B. Pursuant to the Lease, the current Expiration Date is December 31, 2030.
C. The parties now desire to extend the term of the lease for a period of four (4) additional years, to expire on December 31, 2034, and provide for certain other modifications to the Lease on account of such extension.
NOW THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereby amend the Lease as follows:
1. Capitalized terms not defined in this Amendment shall have the meanings given them in the Lease. The background recitals set forth above are hereby incorporated herein.
2. The Term of the Lease is hereby extended for an additional period of four (4) years from its current expiration date of December 31, 2030, such extension period commencing on January 1, 2031 and expiring on December 31, 2034 (the “Second Extended Term”), subject to the terms of the Lease. Accordingly, as of the Effective Date, the Expiration Date stated in Section 1.1 of the Lease is changed to December 31, 2034. The Second Extended Term shall be on all the same terms and conditions contained in the Lease, as hereby amended. Tenant is currently in possession of the Premises and accepts them in their current as-is condition for the Second Extended Term without any representations or warranties by Landlord as to their condition, and without any obligation on the part of Landlord to perform any work to prepare the Premises for Tenant’s continued use. Notwithstanding anything to the contrary contained in the Lease, the parties confirm Tenant has no option to extend or renew the Term of the Lease beyond the expiration of the Second Extended Term.
3. Throughout the Second Extended Term, the Annual Fixed Rent Rate and the Monthly Fixed Rent Rate shall be calculated as follows:
A. Effective as of January 1, 2031, the Annual Fixed Rent Rate shall be adjusted to an amount equal to the greater of (i) the Annual Fixed Rent Rate last in effect, or (ii) the product of the $293,287.50 (i.e., $18.75/rsf multiplied by the Rentable Floor Area of the Premises) multiplied by a fraction, the numerator of which shall equal the Consumer Price Index for All Urban Consumers (CPI-U), Not Seasonally Adjusted, Boston-Cambridge-Newton, MA-NH All Items (1982-1984=100), as published by the Bureau of Labor Statistics of the United States Department of Labor (the “CPI”)1, for November of the year 2030 (or, if not available, as published for the prior month closest to November, 2030) and the denominator of which shall consist of the CPI as published for September of the year 2023 (or, if not available, as published for the prior month closest to September, 2023), with the Increase (as the term is defined below), and only such Increase, then being discounted by twenty-five percent (25%). As used in this paragraph 3, the term “Increase” means the percentage increase in the CPI between the two comparison years used in the applicable calculation under this Section 3. By way of example only, in connection with the calculation set forth above in this subparagraph A, if the CPI for September 2023 was 325.0 and the CPI for November 2030 was 357.5, then the Increase would be ten percent (10%).
B. Effective as of January 1, 2032, and annually thereafter (i.e. January 1, 2033 and January 1, 2034), the Annual Fixed Rent Rate shall be adjusted to be an amount equal to the greater of (i) the Annual Fixed Rent Rate last in effect, or (ii) the product of the Annual Fixed Rent Rate last in effect multiplied by a fraction, the numerator of which shall equal the CPI for November of the prior year (or, if not available, as published for the prior month closest ] to November of the prior year) and the denominator of which shall consist of the CPI as published for November of the year two (2) years’ prior (or, if not available, as published for the prior month closest to November the year two (2) years’ prior), with the Increase, and only such Increase, then being discounted by twenty-five percent (25%).
By way of example only, if the CPI for September 2023 was 325.0 and the CPI for November 2030 was 357.5, then the Annual Fixed Rent for the period of time from January 1, 2031 to December 31, 2031 would be $315,284.06, as determined by performing the following calculations:
|
September 2023 CPI |
325.0 |
|
November 2030 CPI |
357.5 |
|
Increase |
10.00% |
|
Increase discounted by 25% |
7.5% |
|
$293,287.50 x 1.075 (i.e., 7.5% increase) |
$315,284.06 |
Once determined, Tenant shall pay the adjusted amount of the Annual Fixed Rent Rate through the remainder of each applicable calendar year of the Second Extended Term. For any part of the Second Extended Term during which the Fixed Rent Rate has not yet been finally determined, Tenant shall make payments to Landlord on account of Fixed Rent at the rate per square foot of Rentable Floor Area of the Premises last paid under the Lease. The parties shall adjust for any underpayment upon final determination of such rent. If the aforesaid Consumer Price Index is not in existence at the time of the adjustment, the parties shall use such equivalent price index as is published by any successor governmental agency in lieu of the Consumer Price Index, or by such nongovernmental agency as may then be publishing such an equivalent price index.
1 As of the Effective Date, such CPI can be found at: https://www.bls.gov/regions/northeast/data/consumerpriceindex boston table.htm
Fixed Rent and Additional Rent on account of Tenant’s Percentage of Taxes and Operating Costs shall continue to be paid at the same time and in the same manner as currently set forth in Article 4 of the Lease.
4. Tenant represents to Landlord it has dealt with no broker in connection with this Amendment, and in the event of any claims for commissions against Landlord by any broker predicated upon prior dealings with Tenant, Tenant agrees to defend the same and indemnify and hold harmless Landlord against any such claims.
5. Tenant represents and warrants to Landlord that, to the best of Tenant’s actual knowledge, as of the date hereof, (a) the Lease is and remains in good standing and in full force and effect, (b) Tenant has no claims, defenses, counterclaims, set-offs or defenses against Landlord arising out of the Lease or in any way relating thereto or arising out of any other transaction between Landlord and Tenant, and (c) all allowances provided to Tenant, have been paid in full by Landlord to Tenant, and Landlord has no further obligations with respect thereto or to the construction of the Premises.
6. Landlord and Tenant each represent, as to itself, (a) that it is validly existing and in good standing in the state where it was organized; (b) that it has the authority and capacity to enter into this Amendment and perform all of its obligations hereunder; (c) that all necessary action has been taken in order to authorize it to enter into and perform all of its obligations hereunder; and (d) that the person executing this Amendment on its behalf is duly authorized to do so.
7. This Amendment contains the entire agreement of the parties regarding the subject matter hereof. There are no promises, agreements, conditions, undertakings, warranties or representations, oral or written, express or implied, among them, relating to this subject matter, other than as set forth herein.
8. This Amendment shall not be valid and binding until executed and delivered by Landlord, and may be executed in identical counterparts, each of which shall be deemed an original and all of which, when taken together, shall constitute one and the same instrument. Any facsimile, transmittal by PDF or other means of electronic transmittal of original signature versions of this Amendment shall be considered to have the same legal effect as execution and delivery of the original document. The parties agree that execution of this Amendment by means of DocuSign is acceptable and shall be valid and binding, having the same legal effect as execution with original wet signatures, and shall be treated in all respects as the original document.
9. This Amendment shall be construed under the laws of the Commonwealth of Massachusetts and shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and assigns.
10. From and after the date of this Amendment all references to the “Lease” shall mean the Lease, as amended by this Amendment.
Signatures appear on the following page
Except as amended hereby, the Lease is ratified and confirmed in all respects, and shall continue in full force and effect according to its terms, as amended.
Executed under seal as of the Effective Date.
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LANDLORD: |
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NWP BUILDING 3 LLC,
By: NDC Asset Manager LLC Name: Peter Nordblom Name: Crosby Nordblom |
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TENANT: |
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LEMAITRE VASCULAR, INC. |
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By: |
/s/ George W. LeMaitre |
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|
Name: |
George W. LeMaitre |
|||
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Title: |
CEO & Chairman |
|||
Exhibit 10.3
SIXTH AMENDMENT OF LEASE
THIS SIXTH AMENDMENT OF LEASE (this “Amendment”) is made and entered into as of this 18th day of September, 2023 (the “Effective Date”) by and between NWP BUILDING 4 LLC, a Massachusetts limited liability company (“Landlord”) and LEMAITRE VASCULAR, INC., a Massachusetts corporation (“Tenant”).
BACKGROUND
A. Landlord's predecessor-in-interest, the Trustees of Northwest Associates, and Tenant originally entered into a lease dated March 23, 2010, as amended by a First Amendment of Lease dated September 14, 2010, a Second Amendment of Lease dated October 31, 2011, a Third Amendment of Lease dated August 31, 2012, a Fourth Amendment of Lease dated December 20, 2013, and a Fifth Amendment of Lease dated October 29, 2019 (as amended, the "Lease") with respect to the entire building measuring approximately 27,289 rentable square feet (the "Building") located at 53 Second Avenue, Northwest Park, Burlington, MA; and
B. Pursuant to the Lease, the current Expiration Date is December 31, 2030.
C. The parties now desire to extend the term of the lease for a period of four (4) additional years, to expire on December 31, 2034, and provide for certain other modifications to the Lease on account of such extension.
NOW THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereby amend the Lease as follows:
1. Capitalized terms not defined in this Amendment shall have the meanings given them in the Lease. The background recitals set forth above are hereby incorporated herein.
2. The Term of the Lease is hereby extended for an additional period of four (4) years from its current expiration date of December 31, 2030, such extension period commencing on January 1, 2031 and expiring on December 31, 2034 (the “Third Extended Term”), subject to the terms of the Lease. Accordingly, as of the Effective Date, the Expiration Date stated in Section 1.1 of the Lease is changed to December 31, 2034. The Third Extended Term shall be on all the same terms and conditions contained in the Lease, as hereby amended. Tenant is currently in possession of the Premises and accepts them in their current as-is condition for the Third Extended Term without any representations or warranties by Landlord as to their condition, and without any obligation on the part of Landlord to perform any work to prepare the Premises for Tenant’s continued use. Notwithstanding anything to the contrary contained in the Lease, the parties confirm Tenant has no option to extend or renew the Term of the Lease beyond the expiration of the Third Extended Term.
3. Throughout the Third Extended Term, the Annual Fixed Rent Rate and the Monthly Fixed Rent Rate shall be calculated as follows:
A. Effective as of January 1, 2031, the Annual Fixed Rent Rate shall be adjusted to an amount equal to the greater of (i) the Annual Fixed Rent Rate last in effect, or (ii) the product of the $511,668.75 (i.e., $18.75/rsf multiplied by the Rentable Floor Area of the Premises) multiplied by a fraction, the numerator of which shall equal the Consumer Price Index for All Urban Consumers (CPI-U), Not Seasonally Adjusted, Boston-Cambridge-Newton, MA-NH All Items (1982-1984=100), as published by the Bureau of Labor Statistics of the United States Department of Labor (the “CPI”)1, for November of the year 2030 (or, if not available, as published for the prior month closest to November, 2030) and the denominator of which shall consist of the CPI as published for September of the year 2023 (or, if not available, as published for the prior month closest to September, 2023), with the Increase (as the term is defined below), and only such Increase, then being discounted by twenty-five percent (25%). As used in this paragraph 3, the term “Increase” means the percentage increase in the CPI between the two comparison years used in the applicable calculation under this Section 3. By way of example only, in connection with the calculation set forth above in this subparagraph A, if the CPI for September 2023 was 325.0 and the CPI for November 2030 was 357.5, then the Increase would be ten percent (10%).
B. Effective as of January 1, 2032, and annually thereafter (i.e. January 1, 2033 and January 1, 2034), the Annual Fixed Rent Rate shall be adjusted to be an amount equal to the greater of (i) the Annual Fixed Rent Rate last in effect, or (ii) the product of the Annual Fixed Rent Rate last in effect multiplied by a fraction, the numerator of which shall equal the CPI for November of the prior year (or, if not available, as published for the prior month closest ] to November of the prior year) and the denominator of which shall consist of the CPI as published for November of the year two (2) years’ prior (or, if not available, as published for the prior month closest to November the year two (2) years’ prior), with the Increase, and only such Increase, then being discounted by twenty-five percent (25%).
By way of example only, if the CPI for September 2023 was 325.0 and the CPI for November 2030 was 357.5, then the Annual Fixed Rent for the period of time from January 1, 2031 to December 31, 2031 would be $550,043.91, as determined by performing the following calculations:
|
September 2023 CPI |
325.0 |
|
November 2030 CPI |
357.5 |
|
Increase |
10.00% |
|
Increase discounted by 25% |
7.5% |
|
$511,668.75 x 1.075 (i.e., 7.5% increase) |
$550,043.91 |
1 As of the Effective Date, such CPI can be found at: https://www.bls.gov/regions/northeast/data/consumerpriceindex boston table.htm
Once determined, Tenant shall pay the adjusted amount of the Annual Fixed Rent Rate through the remainder of each applicable calendar year of the Third Extended Term. For any part of the Third Extended Term during which the Fixed Rent Rate has not yet been finally determined, Tenant shall make payments to Landlord on account of Fixed Rent at the rate per square foot of Rentable Floor Area of the Premises last paid under the Lease. The parties shall adjust for any underpayment upon final determination of such rent. If the aforesaid Consumer Price Index is not in existence at the time of the adjustment, the parties shall use such equivalent price index as is published by any successor governmental agency in lieu of the Consumer Price Index, or by such nongovernmental agency as may then be publishing such an equivalent price index.
Fixed Rent and Additional Rent on account of Tenant’s Percentage of Taxes and Operating Costs shall continue to be paid at the same time and in the same manner as currently set forth in Article 4 of the Lease.
4. As of the Effective Date of this Amendment, the Lease is amended such that Tenant, at Tenant’s sole cost, shall be responsible for any replacement or repairs exceeding Ten Thousand and 00/100 dollars ($10,000.00) to the roof and/or house HVAC systems during the Term of the Lease. To avoid any confusion, the costs for any replacement or repairs to the roof and/or house HVAC systems that cost Ten Thousand and 00/100 dollars ($10,000.00) or less shall still be subject to the terms of the Lease as set forth therein prior to this Amendment. Any such replacement or repair shall be coordinated by Landlord and use new parts, materials, and units of a similar quality and standard as current conditions. All other capital expenditures shall be performed and charged-back per the terms of the Lease.
5. Tenant represents to Landlord it has dealt with no broker in connection with this Amendment, and in the event of any claims for commissions against Landlord by any broker predicated upon prior dealings with Tenant, Tenant agrees to defend the same and indemnify and hold harmless Landlord against any such claims.
6. Tenant represents and warrants to Landlord that, to the best of Tenant’s actual knowledge, as of the date hereof, (a) the Lease is and remains in good standing and in full force and effect, (b) Tenant has no claims, defenses, counterclaims, set-offs or defenses against Landlord arising out of the Lease or in any way relating thereto or arising out of any other transaction between Landlord and Tenant, and (c) all allowances provided to Tenant, have been paid in full by Landlord to Tenant, and Landlord has no further obligations with respect thereto or to the construction of the Premises.
7. Landlord and Tenant each represent, as to itself, (a) that it is validly existing and in good standing in the state where it was organized; (b) that it has the authority and capacity to enter into this Amendment and perform all of its obligations hereunder; (c) that all necessary action has been taken in order to authorize it to enter into and perform all of its obligations hereunder; and (d) that the person executing this Amendment on its behalf is duly authorized to do so.
8. This Amendment contains the entire agreement of the parties regarding the subject matter hereof. There are no promises, agreements, conditions, undertakings, warranties or representations, oral or written, express or implied, among them, relating to this subject matter, other than as set forth herein.
9. This Amendment shall not be valid and binding until executed and delivered by Landlord, and may be executed in identical counterparts, each of which shall be deemed an original and all of which, when taken together, shall constitute one and the same instrument. Any facsimile, transmittal by PDF or other means of electronic transmittal of original signature versions of this Amendment shall be considered to have the same legal effect as execution and delivery of the original document. The parties agree that execution of this Amendment by means of DocuSign is acceptable and shall be valid and binding, having the same legal effect as execution with original wet signatures, and shall be treated in all respects as the original document.
10. This Amendment shall be construed under the laws of the Commonwealth of Massachusetts and shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and assigns.
11. From and after the date of this Amendment all references to the “Lease” shall mean the Lease, as amended by this Amendment.
Signatures appear on the following page
Except as amended hereby, the Lease is ratified and confirmed in all respects, and shall continue in full force and effect according to its terms, as amended.
Executed under seal as of the Effective Date.
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LANDLORD: |
|||
|
NWP BUILDING 4 LLC,
By: NDC Asset Manager LLC Name: Peter Nordblom By: /s/ Crosby Nordblom Name: Crosby Nordblom |
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TENANT: |
||||
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LEMAITRE VASCULAR, INC. |
||||
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By: |
/s/ George W. LeMaitre |
|||
|
Name: |
George W. LeMaitre |
|||
|
Title: |
CEO & Chairman |
|||
Exhibit 10.4
EIGHTH AMENDMENT OF LEASE
THIS EIGHTH AMENDMENT OF LEASE (this “Amendment”) is made and entered into as of this 18th day of October, 2023 (the “Effective Date”) by and between NWP BUILDING 5 LLC, a Massachusetts limited liability company (“Landlord”) and LEMAITRE VASCULAR, INC., a Massachusetts corporation (“Tenant”).
BACKGROUND
A. Landlord's predecessor-in-interest, the Trustees of Northwest Associates, and Tenant originally entered into a lease dated March 31, 2003, as amended by a First Amendment of Lease dated May 21, 2004, a Second Amendment of Lease dated May 21, 2007, a Third Amendment of Lease dated February 26, 2008, a Fourth Amendment of Lease dated October 31, 2008, a Fifth Amendment of Lease dated March 23, 2010, a Sixth Amendment of Lease dated December 20, 2013, and a Seventh Amendment of Lease (the “Seventh Amendment”) dated October 29, 2019 (as amended, the "Lease") with respect to the entire building measuring approximately 27,098 rentable square feet (the "Building") located at 63 Second Avenue, Northwest Park, Burlington, MA; and
B. Pursuant to the Lease, the current Expiration Date is December 31, 2030.
C. The parties now desire to extend the term of the lease for a period of four (4) additional years, to expire on December 31, 2034, and provide for certain other modifications to the Lease on account of such extension.
NOW THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereby amend the Lease as follows:
1. Capitalized terms not defined in this Amendment shall have the meanings given them in the Lease. The background recitals set forth above are hereby incorporated herein.
2. The Term of the Lease is hereby extended for an additional period of four (4) years from its current expiration date of December 31, 2030, such extension period commencing on January 1, 2031 and expiring on December 31, 2034 (the “Seventh Extended Term”), subject to the terms of the Lease. Accordingly, as of the Effective Date, the Expiration Date stated in Section 1.1 of the Lease is changed to December 31, 2034. The Seventh Extended Term shall be on all the same terms and conditions contained in the Lease, as hereby amended. Tenant is currently in possession of the Premises and accepts them in their current as-is condition for the Seventh Extended Term without any representations or warranties by Landlord as to their condition, and without any obligation on the part of Landlord to perform any work to prepare the Premises for Tenant’s continued use. Notwithstanding anything to the contrary contained in the Lease, the parties confirm Tenant has no option to extend or renew the Term of the Lease beyond the expiration of the Seventh Extended Term.
3. Throughout the Seventh Extended Term, the Annual Fixed Rent Rate and the Monthly Fixed Rent Rate shall be calculated as follows:
A. Effective as of January 1, 2031, the Annual Fixed Rent Rate shall be adjusted to an amount equal to the greater of (i) the Annual Fixed Rent Rate last in effect, or (ii) the product of the $508,087.50 (i.e., $18.75/rsf multiplied by the Rentable Floor Area of the Premises) multiplied by a fraction, the numerator of which shall equal the Consumer Price Index for All Urban Consumers (CPI-U), Not Seasonally Adjusted, Boston-Cambridge-Newton, MA-NH All Items (1982-1984=100), as published by the Bureau of Labor Statistics of the United States Department of Labor (the “CPI”)1, for November of the year 2030 (or, if not available, as published for the prior month closest to November, 2030) and the denominator of which shall consist of the CPI as published for September of the year 2023 (or, if not available, as published for the prior month closest to September, 2023), with the Increase (as the term is defined below), and only such Increase, then being discounted by twenty-five percent (25%). As used in this paragraph 3, the term “Increase” means the percentage increase in the CPI between the two comparison years used in the applicable calculation under this Section 3. By way of example only, in connection with the calculation set forth above in this subparagraph A, if the CPI for September 2023 was 325.0 and the CPI for November 2030 was 357.5, then the Increase would be ten percent (10%).
B. Effective as of January 1, 2032, and annually thereafter (i.e. January 1, 2033 and January 1, 2034), the Annual Fixed Rent Rate shall be adjusted to be an amount equal to the greater of (i) the Annual Fixed Rent Rate last in effect, or (ii) the product of the Annual Fixed Rent Rate last in effect multiplied by a fraction, the numerator of which shall equal the CPI for November of the prior year (or, if not available, as published for the prior month closest ] to November of the prior year) and the denominator of which shall consist of the CPI as published for November of the year two (2) years’ prior (or, if not available, as published for the prior month closest to November the year two (2) years’ prior), with the Increase, and only such Increase, then being discounted by twenty-five percent (25%).
By way of example only, if the CPI for September 2023 was 325.0 and the CPI for November 2030 was 357.5, then the Annual Fixed Rent for the period of time from January 1, 2031 to December 31, 2031 would be $546,194.06, as determined by performing the following calculations:
|
September 2023 CPI |
325.0 |
|
November 2030 CPI |
357.5 |
|
Increase |
10.00% |
|
Increase discounted by 25% |
7.5% |
|
$508,087.50 x 1.075 (i.e., 7.5% increase) |
$546,194.06 |
1 As of the Effective Date, such CPI can be found at: https://www.bls.gov/regions/northeast/data/consumerpriceindex boston table.htm
Once determined, Tenant shall pay the adjusted amount of the Annual Fixed Rent Rate through the remainder of each applicable calendar year of the Seventh Extended Term. For any part of the Seventh Extended Term during which the Fixed Rent Rate has not yet been finally determined, Tenant shall make payments to Landlord on account of Fixed Rent at the rate per square foot of Rentable Floor Area of the Premises last paid under the Lease. The parties shall adjust for any underpayment upon final determination of such rent. If the aforesaid Consumer Price Index is not in existence at the time of the adjustment, the parties shall use such equivalent price index as is published by any successor governmental agency in lieu of the Consumer Price Index, or by such nongovernmental agency as may then be publishing such an equivalent price index.
Fixed Rent and Additional Rent on account of Tenant’s Percentage of Taxes and Operating Costs shall continue to be paid at the same time and in the same manner as currently set forth in Article 4 of the Lease.
4. The fourth paragraph of the Seventh Amendment is hereby amended by inserting the following sentence: “To avoid any confusion, the costs for any replacement or repairs to the roof and/or house HVAC systems that cost Ten Thousand and 00/100 dollars ($10,000.00) or less shall still be subject to the terms of the Lease as set forth therein prior to this Seventh Amendment.”
5. Tenant represents to Landlord it has dealt with no broker in connection with this Amendment, and in the event of any claims for commissions against Landlord by any broker predicated upon prior dealings with Tenant, Tenant agrees to defend the same and indemnify and hold harmless Landlord against any such claims.
6. Tenant represents and warrants to Landlord that, to the best of Tenant’s actual knowledge, as of the date hereof, (a) the Lease is and remains in good standing and in full force and effect, (b) Tenant has no claims, defenses, counterclaims, set-offs or defenses against Landlord arising out of the Lease or in any way relating thereto or arising out of any other transaction between Landlord and Tenant, and (c) all allowances provided to Tenant, have been paid in full by Landlord to Tenant, and Landlord has no further obligations with respect thereto or to the construction of the Premises.
7. Landlord and Tenant each represent, as to itself, (a) that it is validly existing and in good standing in the state where it was organized; (b) that it has the authority and capacity to enter into this Amendment and perform all of its obligations hereunder; (c) that all necessary action has been taken in order to authorize it to enter into and perform all of its obligations hereunder; and (d) that the person executing this Amendment on its behalf is duly authorized to do so.
8. This Amendment contains the entire agreement of the parties regarding the subject matter hereof. There are no promises, agreements, conditions, undertakings, warranties or representations, oral or written, express or implied, among them, relating to this subject matter, other than as set forth herein.
9. This Amendment shall not be valid and binding until executed and delivered by Landlord, and may be executed in identical counterparts, each of which shall be deemed an original and all of which, when taken together, shall constitute one and the same instrument. Any facsimile, transmittal by PDF or other means of electronic transmittal of original signature versions of this Amendment shall be considered to have the same legal effect as execution and delivery of the original document. The parties agree that execution of this Amendment by means of DocuSign is acceptable and shall be valid and binding, having the same legal effect as execution with original wet signatures, and shall be treated in all respects as the original document.
10. This Amendment shall be construed under the laws of the Commonwealth of Massachusetts and shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and assigns.
11. From and after the date of this Amendment all references to the “Lease” shall mean the Lease, as amended by this Amendment.
Signatures appear on the following page
Except as amended hereby, the Lease is ratified and confirmed in all respects, and shall continue in full force and effect according to its terms, as amended.
Executed under seal as of the Effective Date.
|
LANDLORD: |
|||
|
NWP BUILDING 5 LLC,
By: NDC Asset Manager LLC Name: Peter Nordblom as Manager and not individually
By: /s/ Crosby Nordblom Name: Crosby Nordblom |
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TENANT: |
||||
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LEMAITRE VASCULAR, INC. |
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By: |
/s/ George W. LeMaitre |
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Name: |
||||
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Title: |
||||
EXHIBIT 31.1
CERTIFICATION
I, George W. LeMaitre, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of LeMaitre Vascular, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
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/s/ George W. LeMaitre |
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George W. LeMaitre |
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Chairman and Chief Executive Officer |
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(Principal Executive Officer) |
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Date: November 7, 2023 |
EXHIBIT 31.2
CERTIFICATION
I, Joseph P. Pellegrino, Jr., certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of LeMaitre Vascular, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
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/s/ Joseph P. Pellegrino, Jr. |
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Joseph P. Pellegrino, Jr. |
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Chief Financial Officer and Director |
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(Principal Accounting and Financial Officer) |
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Date: November 7, 2023 |
EXHIBIT 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Pursuant to the requirement set forth in Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended, (the “Exchange Act”), and Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. §1350), George W. LeMaitre, Chairman and Chief Executive Officer of LeMaitre Vascular, Inc. (the “Company”), certifies to the best of his knowledge that:
(1) The Company’s Quarterly Report on Form 10-Q for the period ended September 30, 2023 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
This certification is being provided pursuant to 18 U.S.C. § 1350 and is not deemed to be a part of the Report, nor is it to deemed to be “filed” for any purpose whatsoever.
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/s/ George W. LeMaitre |
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George W. LeMaitre |
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Chairman and Chief Executive Officer |
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(Principal Executive Officer) |
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November 7, 2023 |
EXHIBIT 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Pursuant to the requirement set forth in Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended, (the “Exchange Act”), and Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. §1350), Joseph P. Pellegrino, Jr., Chief Financial Officer of LeMaitre Vascular, Inc. (the “Company”), certifies to the best of his knowledge that:
(1) The Company’s Quarterly Report on Form 10-Q for the period ended September 30, 2023 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
This certification is being provided pursuant to 18 U.S.C. § 1350 and is not deemed to be a part of the Report, nor is it to deemed to be “filed” for any purpose whatsoever.
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/s/ Joseph P. Pellegrino, Jr. |
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Joseph P. Pellegrino, Jr. |
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Chief Financial Officer and Director |
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(Principal Accounting and Financial Officer) |
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November 7, 2023 |