PART I This section outlines LeMaitre Vascular's business, market, strategies, products, regulatory environment, and associated risks [Business Overview](index=4&type=section&id=Item%201.%20Business) LeMaitre Vascular is a global provider of medical devices and human tissue cryopreservation services, primarily for peripheral vascular disease, focusing on vascular surgeons, niche markets, and growth through direct sales and acquisitions, operating under extensive regulatory oversight [Overview](index=4&type=section&id=Overview) LeMaitre Vascular is a global provider of medical devices and human tissue cryopreservation services for peripheral vascular disease, with an estimated $900 million core market - LeMaitre Vascular is a global provider of medical devices and human tissue cryopreservation services, primarily used in the treatment of peripheral vascular disease[16](index=16&type=chunk) - The company develops, manufactures, and markets vascular devices for vascular surgeons and other specialties, with a diversified portfolio of brand-name products[16](index=16&type=chunk) - The estimated annual worldwide market for the company's core product lines is approximately **$900 million**[16](index=16&type=chunk) [The Peripheral Vascular Disease Market](index=5&type=section&id=The%20Peripheral%20Vascular%20Disease%20Market) The peripheral vascular disease market, exceeding $5 billion, is growing due to increased incidence and endovascular device adoption, though the company primarily serves open vascular procedures - Peripheral vascular disease affects over **200 million people worldwide**, with the annual market for all peripheral vascular devices exceeding **$5 billion**[18](index=18&type=chunk) - Market growth is driven by increasing incidence and diagnosis rates, a shift to higher-priced endovascular devices, and adoption of Western healthcare standards in developing countries[18](index=18&type=chunk) - In 2019, over **90% of the company's net sales** were from devices used in open vascular procedures, despite the market trend towards minimally invasive endovascular procedures[19](index=19&type=chunk) [Our Business Strategies](index=5&type=section&id=Our%20Business%20Strategies) The company's strategy focuses on vascular surgeons, niche markets, and direct sales expansion, aiming for higher prices and market share through direct-to-hospital sales - The company's growth strategy is three-pronged: focusing on the vascular surgeon call point, competing in low-rivalry niche markets, and expanding through a worldwide direct sales force and complementary acquisitions/R&D[20](index=20&type=chunk)[21](index=21&type=chunk)[22](index=22&type=chunk) - Approximately **84% of 2019 sales** were to hospitals for use by vascular surgeons, with recent exploration into adjacent markets like cardiac and neurosurgeons[21](index=21&type=chunk) - The company aims to build leading positions in niche segments, believing this allows for higher selling prices and market share gains due to less competitive focus[21](index=21&type=chunk) - Direct-to-hospital sales, which accounted for **94% of net sales in 2019**, are favored for building customer relationships, achieving higher selling prices, and better gross margins[22](index=22&type=chunk) [Acquisition History](index=6&type=section&id=Acquisition%20History) Since 1998, the company completed 23 acquisitions, expanding its portfolio to 15 product lines, with manufacturing consolidated to Burlington, Massachusetts - Since 1998, LeMaitre Vascular has completed **23 acquisitions** of complementary products, expanding its portfolio to **15 product lines**[23](index=23&type=chunk) - Key acquisitions in 2018-2019 include Syntel and Python embolectomy catheters, Cardial (polyester grafts, valvulotomes, surgical glue), Tru-Incise valve cutters, and CardioCel and VascuCel biologic patches[23](index=23&type=chunk) - Manufacturing operations for **15 of the 23 acquisitions** have been relocated to the Burlington, Massachusetts headquarters to improve efficiency[23](index=23&type=chunk) [Our Products and Services](index=7&type=section&id=Our%20Products%20and%20Services) The company offers 15 product lines for vascular disease and open vascular surgery, alongside tissue cryopreservation, with biologic devices constituting 35% of 2019 sales - The company offers a portfolio of **15 product lines**, primarily for vascular disease and open vascular surgery, along with human tissue cryopreservation services[25](index=25&type=chunk) Revenue Distribution by Anatomical Area | Anatomical Area | 2019 Revenue % | 2018 Revenue % | 2017 Revenue % | | :---------------- | :------------- | :------------- | :------------- | | Lower Extremities | 51% | 51% | 51% | | Carotid Artery | 31% | 34% | 32% | | Other Areas | 18% | 15% | 17% | - Biologic devices (e.g., XenoSure patch, Omniflow II graft, RestoreFlow Allograft) constituted **35% of sales in 2019**, **36% in 2018**, and **34% in 2017**[26](index=26&type=chunk) [Sales and Marketing](index=8&type=section&id=Sales%20and%20Marketing) The company employs 112 field sales representatives, generating over 94% of net sales directly, and provides training to vascular surgeon customers - As of December 31, 2019, the company employed **112 field sales representatives**, with over **94% of net sales** generated in direct sales territories[42](index=42&type=chunk) - Direct marketing efforts, including medical congress exhibitions and direct mail, are used to reach vascular surgeons beyond the direct sales force's reach[43](index=43&type=chunk) - The company provides training to vascular surgeon customers on specific procedures and has initiated a general surgical skills training program for less experienced doctors[44](index=44&type=chunk) [Research and Development](index=9&type=section&id=Research%20and%20Development) R&D focuses on expanding biologic product lines, integrating acquired manufacturing, and developing new products, with increased spending due to EU MDR requirements - R&D activities in 2018-2019 focused on expanding and enhancing biologic product lines (XenoSure, Omniflow II), integrating acquired manufacturing (ProCol), and developing new products like a biologic dural patch and a next-generation powered phlebectomy system[45](index=45&type=chunk) - Increasing regulatory requirements, particularly the EU MDR, necessitate more clinical and non-clinical testing, leading to increased R&D spending[47](index=47&type=chunk)[48](index=48&type=chunk) - A clinical trial for XenoSure in China, initiated in 2017, is expected to complete enrollment in **2020**, with NMPA submission in **2021**[47](index=47&type=chunk) [Manufacturing and Processing](index=9&type=section&id=Manufacturing%20and%20Processing) Primary manufacturing is in Burlington, Massachusetts, with specialized international facilities, relying on single-source suppliers and adhering to ISO 13485 standards - Primary manufacturing is in Burlington, Massachusetts, with additional facilities in North Melbourne (Australia), Saint-Etienne (France), and Fox River Grove (Illinois) for specific products and human tissue processing[49](index=49&type=chunk) - The company integrates manufacturing of newly acquired lines into Burlington operations, with transfers for Omniflow II and Applied Medical embolectomy assets expected to complete in **2020**[50](index=50&type=chunk) - The company relies on single- and limited-source suppliers for key components and third-party manufactured products, such as CardioCel and VascuCel devices from Admedus Ltd[54](index=54&type=chunk) - Manufacturing and processing facilities are certified to **ISO 13485 standards** and accredited by the American Association of Tissue Banks (AATB) for human tissue operations, subject to periodic inspections by regulatory authorities[55](index=55&type=chunk) [Competition](index=10&type=section&id=Competition) The medical device market is highly competitive, with larger rivals possessing greater resources, and the shift to endovascular procedures poses a challenge for the company's open surgery focus - The medical device market is highly competitive and characterized by rapid technological advances, with no single company competing across all product lines[56](index=56&type=chunk) - Key competitors include larger companies like Baxter International, Boston Scientific, Medtronic, and CryoLife, which often possess greater financial, R&D, and marketing resources[56](index=56&type=chunk)[58](index=58&type=chunk) - Success depends on effective service, superior product technology, quality, availability, reliability, ease of use, cost-effectiveness, physician familiarity, and brand recognition[57](index=57&type=chunk) - The shift from open vascular surgery to minimally invasive endovascular procedures poses a competitive challenge, as most of the company's products are used in open surgery[57](index=57&type=chunk) [Intellectual Property](index=12&type=section&id=Intellectual%20Property) The company protects its intellectual property through trade secrets, patents, and trademarks, with most U.S. patents expiring by 2032 and some products under license - The company relies on trade secret laws, patents, trademarks, and confidentiality agreements to protect its intellectual property[59](index=59&type=chunk) - The majority of issued U.S. patents are set to expire between **2020 and 2032**[60](index=60&type=chunk) - Some products, like the Periscope Dissector, are sold under license agreements requiring royalty payments[62](index=62&type=chunk) - Most products are not patent-protected, and the company relies on trade secret protection for unpatented technology[64](index=64&type=chunk) [Government Regulation](index=13&type=section&id=Government%20Regulation) Medical devices and human tissues are extensively regulated by the FDA and foreign governments, with EU MDR transition requiring new CE marks and increased clinical testing - Medical devices and human tissues are subject to extensive regulation by the FDA in the U.S. and by foreign governments globally[68](index=68&type=chunk)[69](index=69&type=chunk) - Most devices require either **510(k) clearance** or Premarket Application (PMA) approval from the FDA; nearly all current U.S. devices are **510(k)-cleared**, except the ProCol biologic vascular graft (**PMA approved**)[70](index=70&type=chunk)[71](index=71&type=chunk)[77](index=77&type=chunk) - Postmarket regulations include annual registration, Quality System Regulation (QSR) compliance, labeling rules, medical device reporting, and corrections/removal reporting[78](index=78&type=chunk) - Human allografts are regulated by the FDA under **21 CFR Part 1271**, requiring establishment registration, donor-eligibility criteria, and good tissue practices[80](index=80&type=chunk) - In the EU, products are regulated under the Medical Devices Directive (MDD) and will transition to the new Medical Device Regulations (MDR), requiring new CE marks under more stringent standards[86](index=86&type=chunk)[91](index=91&type=chunk) - A lapse in CE mark certifications for some products (e.g., XenoSure, AlboGraft, Anastoclip systems) is expected until **Q2 2020 to Q4 2021** due to a Notified Body ceasing services, potentially leading to backorders[90](index=90&type=chunk) - Other countries like Canada, Japan, Australia, and China have their own regulatory frameworks, with China's NMPA requiring clinical trials for new products and longer lead times for registration[95](index=95&type=chunk)[96](index=96&type=chunk)[97](index=97&type=chunk)[98](index=98&type=chunk) [Third-Party Reimbursement](index=18&type=section&id=Third-Party%20Reimbursement) Product demand depends on third-party payor reimbursement, which is subject to legislative changes, budgetary pressures, and varying international policies - Demand for products depends on third-party payor reimbursement (Medicare, Medicaid, private insurers), which varies by payor and setting[100](index=100&type=chunk) - Reimbursement policies are subject to legislative and regulatory changes and budgetary pressures, potentially limiting coverage or offering insufficient rates[100](index=100&type=chunk)[102](index=102&type=chunk) - Managed care systems and prospective payment systems (e.g., diagnosis-related groups) may incorporate product reimbursement into overall procedure costs, without separate payment for devices[103](index=103&type=chunk) - Non-U.S. reimbursement systems vary by country, and approval must be obtained individually, often relying on distributors[105](index=105&type=chunk) [Fraud and Abuse Laws](index=19&type=section&id=Fraud%20and%20Abuse%20Laws) The company is subject to federal and state healthcare fraud and abuse laws, including the Anti-Kickback Statute, with potential for significant penalties for non-compliance - The company is subject to federal and state healthcare fraud and abuse laws, including the Anti-Kickback Statute and the Physician Payments Sunshine Act[106](index=106&type=chunk)[107](index=107&type=chunk) - Violations can result in criminal penalties, civil sanctions, fines, imprisonment, and exclusion from federal healthcare programs[106](index=106&type=chunk) [Employees](index=19&type=section&id=Employees) As of December 31, 2019, the company employed 479 individuals, with 454 being full-time employees - As of December 31, 2019, the company had **479 employees**, including **454 full-time employees**[108](index=108&type=chunk) [Customers](index=19&type=section&id=Customers) The company's sales are diversified, with no single customer or distributor accounting for more than 2% of net sales in 2019 - The company's sales are not dependent on any single customer or distributor, with no single customer accounting for more than **2% of net sales in 2019**[109](index=109&type=chunk) [Corporate Information](index=19&type=section&id=Corporate%20Information) LeMaitre Vascular, Inc. was reincorporated in Delaware in 1998, and its common stock trades on The Nasdaq Global Market under 'LMAT' since 2006 - LeMaitre Vascular, Inc. was reincorporated in Delaware on **June 16, 1998**, and its common stock trades on The Nasdaq Global Market under the symbol '**LMAT**' since its IPO on **October 19, 2006**[110](index=110&type=chunk) - LeMaitre Vascular is a global provider of medical devices and human tissue cryopreservation services, primarily for the treatment of peripheral vascular disease[16](index=16&type=chunk) - The estimated annual worldwide market addressed by the company's core product lines is approximately **$900 million**, within a broader peripheral vascular device market exceeding **$5 billion**[16](index=16&type=chunk)[18](index=18&type=chunk) - The company's business strategy involves focusing on vascular surgeons, competing in low-rivalry niche markets, and expanding its direct sales force while acquiring and developing complementary vascular devices[20](index=20&type=chunk)[21](index=21&type=chunk)[22](index=22&type=chunk) - As of December 31, 2019, the sales force comprised **112 representatives**, generating approximately **94% of net sales** through direct-to-hospital channels[17](index=17&type=chunk)[42](index=42&type=chunk) - In 2019, over **90% of net sales** were from devices used in open vascular procedures, indicating a primary focus on this segment despite a market shift towards minimally invasive endovascular procedures[19](index=19&type=chunk) Product Line Revenue Contribution (2019) | Anatomical Area | % of Revenues | | :---------------- | :------------ | | Lower Extremities | 51% | | Carotid Artery | 31% | | Other Areas | 18% | - Biologic devices, including patches and grafts, represented **35% of sales in 2019**[26](index=26&type=chunk) - Research and development efforts in 2019 focused on biologic products, including a new dural patch and integration of Omniflow II manufacturing, alongside a clinical trial for XenoSure in China and development of a next-generation phlebectomy system[45](index=45&type=chunk)[47](index=47&type=chunk) - The company's manufacturing facilities are **ISO 13485 certified**, with primary operations in Burlington, Massachusetts, and specialized facilities in Australia, France, and Illinois for specific product lines and tissue processing[49](index=49&type=chunk)[55](index=55&type=chunk) - The EU's new Medical Device Regulations (MDR) will impose more rigorous requirements, including clinical evidence for most Class III and implantable devices, potentially impacting future sales if new CE marks are not obtained timely[48](index=48&type=chunk)[91](index=91&type=chunk) - Demand for products is dependent on third-party payor reimbursement policies, which are subject to legislative and regulatory changes and cost containment pressures, potentially impacting sales volumes and pricing flexibility[100](index=100&type=chunk)[102](index=102&type=chunk) [Risk Factors](index=20&type=section&id=Item%201A.%20Risk%20Factors) The company faces multiple risks in regulatory compliance, financial volatility, market shifts, acquisition integration, supply chain, international operations, and stock price [Risks Related to Our Business](index=20&type=section&id=Risks%20Related%20to%20Our%20Business) Business risks include regulatory non-compliance, financial fluctuations, narrow market focus, acquisition integration challenges, supply chain dependence, international operating risks, product liability, and direct sales conversion issues - Non-compliance with foreign regulatory requirements, particularly the EU MDR and the lapse of CE mark certifications for several products, could significantly harm the business by restricting sales[114](index=114&type=chunk)[115](index=115&type=chunk)[117](index=117&type=chunk) - The company's financial results are subject to significant fluctuations due to changes in product demand, competition, product mix, economic conditions, and regulatory actions[125](index=125&type=chunk) - The narrow focus on open vascular surgery, which accounts for over **90% of net sales**, may hinder growth as the market shifts towards minimally invasive endovascular procedures[127](index=127&type=chunk)[139](index=139&type=chunk) - Difficulties in integrating acquired businesses, such as manufacturing operations, personnel, and regulatory compliance, could prevent the realization of anticipated benefits and harm financial performance[133](index=133&type=chunk)[136](index=136&type=chunk) - Dependence on sole- and limited-source suppliers for key components and products, including CardioCel and VascuCel, creates a risk of supply interruptions and increased costs[146](index=146&type=chunk)[148](index=148&type=chunk)[149](index=149&type=chunk) - International operations, representing **46% of 2019 net sales**, are exposed to foreign currency fluctuations, governmental controls, trade restrictions, and political/economic instability, with Brexit and pandemic diseases like Covid-19 posing additional risks[158](index=158&type=chunk)[160](index=160&type=chunk)[164](index=164&type=chunk)[165](index=165&type=chunk) - Product liability suits arising from defective products or misuse could be costly, divert management attention, and damage the company's reputation[170](index=170&type=chunk)[171](index=171&type=chunk) - Converting from distributor sales to direct sales models in international markets can lead to sales disruptions, adverse cash flow effects, and challenges in meeting new regulatory requirements or establishing effective sales forces[173](index=173&type=chunk)[175](index=175&type=chunk) [Risks Related to the Regulatory Environment](index=32&type=section&id=Risks%20Related%20to%20the%20Regulatory%20Environment) Regulatory risks involve extensive compliance with anti-kickback laws, FDA approvals, QSR, and Good Tissue Practices, with potential for recalls, license withdrawals, and restrictive reimbursement policies - The medical device industry is subject to extensive and complex regulations, including anti-kickback laws and the Physician Payments Sunshine Act, with non-compliance potentially leading to significant penalties and enforcement actions[178](index=178&type=chunk)[179](index=179&type=chunk)[180](index=180&type=chunk) - Failure to obtain and maintain FDA clearances (**510(k)**) and approvals (PMA) or foreign regulatory approvals (CE Mark) for medical devices would prevent product sales and significantly hamper future growth[181](index=181&type=chunk)[183](index=183&type=chunk) - Non-compliance with the FDA's Quality System Regulation (QSR) and Good Tissue Practices could disrupt manufacturing, impact sales and profitability, and result in various enforcement actions[184](index=184&type=chunk)[185](index=185&type=chunk)[186](index=186&type=chunk) - Products may be subject to recalls, and licenses/approvals could be withdrawn or suspended due to non-compliance or unforeseen problems, leading to significant costs and adverse publicity[188](index=188&type=chunk)[189](index=189&type=chunk)[190](index=190&type=chunk)[191](index=191&type=chunk) - Restrictive reimbursement practices by third-party payors and cost containment measures could decrease demand for products and the prices customers are willing to pay[192](index=192&type=chunk)[194](index=194&type=chunk) [Risks Related to Intellectual Property](index=35&type=section&id=Risks%20Related%20to%20Intellectual%20Property) Intellectual property risks include failure to protect rights and potential litigation for infringement, leading to competitive disadvantage or costly product redesigns - Failure to adequately protect intellectual property rights (patents, trademarks, trade secrets) could lead to a loss of competitive advantage and harm the business[196](index=196&type=chunk)[197](index=197&type=chunk)[198](index=198&type=chunk) - The medical device industry is prone to intellectual property litigation, and claims of infringement by third parties could result in significant liabilities, costs, and the need to redesign or discontinue affected products[199](index=199&type=chunk)[204](index=204&type=chunk) [Risks Related to Our Common Stock](index=37&type=section&id=Risks%20Related%20to%20Our%20Common%20Stock) Common stock risks include price volatility, significant influence from the CEO's voting power, and no assurance of future dividend payments - The company's stock price may experience significant volatility due to various factors, including fluctuations in operating results, product announcements, regulatory actions, and changes in analyst recommendations[206](index=206&type=chunk)[207](index=207&type=chunk) - The chief executive officer and the LeMaitre Family LLC collectively control approximately **16% of outstanding common stock**, which could significantly influence matters requiring stockholder approval and potentially affect the market price[208](index=208&type=chunk) - The company has not established a minimum dividend payment level, and there is no assurance of its ability to pay future dividends, which depends on financial condition, liquidity, earnings projections, and business prospects[210](index=210&type=chunk) - The company faces risks from non-compliance with foreign regulatory requirements, including potential delays or denials of CE mark reissuance for several products (e.g., XenoSure, AlboGraft, Anastoclip systems) until **Q2 2020 to Q4 2021**, which could lead to backorders and harm business[114](index=114&type=chunk)[115](index=115&type=chunk)[116](index=116&type=chunk) - The EU's new Medical Device Regulations (MDR) will impose more rigorous requirements, including clinical evidence for most Class III and implantable devices, potentially impacting future sales if new CE marks are not obtained timely[117](index=117&type=chunk)[118](index=118&type=chunk) - Significant fluctuations in quarterly and annual results can arise from changes in demand, competition, product mix, acquisitions, economic conditions, and regulatory actions[125](index=125&type=chunk) - The company's focus on open vascular surgery (over **90% of 2019 net sales**) may be too narrow, as the market shifts towards minimally invasive endovascular procedures, potentially impacting future sales if product offerings are not expanded[127](index=127&type=chunk)[139](index=139&type=chunk) - Acquisitions, a key growth strategy, carry risks such as integration difficulties, lower margins from acquired devices, diversion of management's attention, and challenges in regulatory compliance and retaining key employees[133](index=133&type=chunk)[136](index=136&type=chunk) - Dependence on sole- and limited-source suppliers for critical components and products, like CardioCel and VascuCel from Admedus Ltd., poses a risk of supply interruptions and production delays[146](index=146&type=chunk)[148](index=148&type=chunk)[149](index=149&type=chunk) - International operations, which accounted for **46% of net sales in 2019**, expose the company to risks including foreign currency fluctuations, governmental controls, trade restrictions, and political/economic instability, exacerbated by events like Brexit and pandemic diseases such as Covid-19[158](index=158&type=chunk)[160](index=160&type=chunk)[164](index=164&type=chunk)[165](index=165&type=chunk) - Failure to adequately protect intellectual property rights (patents, trade secrets) or claims of infringement by third parties could lead to competitive disadvantage, costly litigation, and the need to redesign or discontinue products[196](index=196&type=chunk)[199](index=199&type=chunk) - The company's stock price may be volatile due to various factors, and the CEO and LeMaitre Family LLC collectively control approximately **16% of outstanding common stock**, potentially influencing stockholder approval matters[206](index=206&type=chunk)[208](index=208&type=chunk) [Unresolved Staff Comments](index=38&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) No unresolved staff comments were reported for the fiscal year ended December 31, 2019 - No unresolved staff comments were reported[211](index=211&type=chunk) [Properties](index=38&type=section&id=Item%202.%20Properties) The company's main operations are in five leased facilities in Burlington, Massachusetts, with international offices in Germany and globally, all deemed adequate for current needs - The company's principal worldwide executive, distribution, and manufacturing operations are located in five leased facilities in Burlington, Massachusetts, with leases extended through **December 2030**[212](index=212&type=chunk) - International operations are headquartered in Sulzbach, Germany, with additional manufacturing, processing, distribution, and sales offices in other U.S., European, and Asia/Pacific Rim locations[212](index=212&type=chunk) - Current facilities are believed to be adequate for the company's needs based on current operating plans[212](index=212&type=chunk) [Legal Proceedings](index=38&type=section&id=Item%203.%20Legal%20Proceedings) The company is involved in routine legal matters, but management does not anticipate a material adverse effect on its financial position or operations as of December 31, 2019 - The company is periodically involved in lawsuits, claims, investigations, and litigation threats concerning intellectual property, employment, contractual, and commercial matters[213](index=213&type=chunk) - As of December 31, 2019, management believes no current legal proceedings would reasonably be expected to have a material adverse effect on the company's financial position, results of operations, or cash flows[213](index=213&type=chunk) [Mine Safety Disclosures](index=38&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company's operations - This item is not applicable[214](index=214&type=chunk) PART II This section covers the company's common stock, selected financial data, management's discussion, market risk, and financial statements [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=39&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company's common stock trades on Nasdaq under 'LMAT', with 167 stockholders of record as of March 2, 2020, and Q4 2019 share repurchases for RSU tax obligations - LeMaitre Vascular's common stock is publicly traded on The Nasdaq Global Market under the symbol '**LMAT**' since its initial public offering on **October 19, 2006**[217](index=217&type=chunk) - As of **March 2, 2020**, there were approximately **167 stockholders of record**[218](index=218&type=chunk) Issuer Purchases of Equity Securities (Q4 2019) | Period | Total Number of Shares Purchased | Average Price Paid Per Share | | :-------------------------------------- | :------------------------------- | :--------------------------- | | December 1, 2019 through December 31, 2019 | 6,657 | $35.66 | | Total | 6,657 | $35.66 | - The repurchases were made to satisfy employees' obligations for minimum statutory withholding taxes in connection with the vesting of restricted stock units[226](index=226&type=chunk) [Selected Financial Data](index=42&type=section&id=Item%206.%20Selected%20Financial%20Data) Selected consolidated financial data for 2015-2019 shows net sales growth from $78.35 million to $117.23 million, fluctuating net income, and increased total assets and stockholders' equity Consolidated Statements of Operations Data (2015-2019, in thousands) | Metric | 2019 | 2018 | 2017 | 2016 | 2015 | | :------------------------- | :-------- | :-------- | :-------- | :-------- | :-------- | | Net sales | $117,232 | $105,568 | $100,867 | $89,151 | $78,352 | | Gross profit | $79,853 | $73,939 | $70,697 | $62,936 | $54,166 | | Income from operations | $21,183 | $28,209 | $21,103 | $16,336 | $11,513 | | Net income | $17,934 | $22,943 | $17,177 | $10,590 | $7,758 | | Basic EPS | $0.91 | $1.18 | $0.91 | $0.57 | $0.44 | | Diluted EPS | $0.88 | $1.13 | $0.86 | $0.55 | $0.42 | | Cash dividends per share | $0.34 | $0.28 | $0.22 | $0.18 | $0.16 | Consolidated Balance Sheet Data (2015-2019, in thousands) | Metric | 2019 | 2018 | 2017 | 2016 | 2015 | | :------------------------- | :-------- | :-------- | :-------- | :-------- | :-------- | | Cash and cash equivalents | $11,786 | $26,318 | $19,096 | $24,288 | $27,451 | | Short-term marketable securities | $20,895 | $21,668 | $22,564 | - | - | | Total assets | $188,341 | $153,088 | $126,323 | $101,924 | $90,704 | | Total liabilities | $40,200 | $22,853 | $16,553 | $14,424 | $12,820 | | Total stockholders' equity | $148,141 | $130,235 | $109,770 | $87,500 | $77,884 | [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=43&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) MD&A reviews 2017-2019 financial performance, highlighting 2019 net sales growth driven by acquisitions, decreased gross margin, increased operating expenses, and a decline in net income, with liquidity supported by cash and investments [Overview](index=43&type=section&id=Overview) LeMaitre Vascular develops and markets medical devices for peripheral vascular disease, employing a direct sales force and pursuing growth through acquisitions and niche market focus - LeMaitre Vascular develops, manufactures, and markets medical devices and implants for peripheral vascular disease, with some applications in cardiovascular disease and neurosurgery[232](index=232&type=chunk) - The company's strategy involves a focused call point on vascular surgeons, competing in low-rivalry niche markets, and expanding through direct sales and acquisitions[232](index=232&type=chunk) - Key product lines include valvulotomes, biologic vascular patches and grafts, carotid shunts, embolectomy catheters, and human tissue cryopreservation services[234](index=234&type=chunk) - In 2019, approximately **94% of net sales** were generated by the direct sales force, which comprised **112 representatives** across North America, Europe, and Asia/Pacific Rim[238](index=238&type=chunk) - Recent acquisitions include Tru-Incise valve cutters (2019) and CardioCel/VascuCel biologic patches (2019), alongside manufacturing transfers for acquired product lines to Burlington, MA[241](index=241&type=chunk)[242](index=242&type=chunk) - Changes in foreign exchange rates decreased reported sales by approximately **$2.3 million** for the year ended December 31, 2019[244](index=244&type=chunk) [Net Sales and Expense Components](index=46&type=section&id=Net%20Sales%20and%20Expense%20Components) This section details revenue recognition, cost of sales, operating expenses (sales, G&A, R&D), other income/expense, and income tax expense components - Net sales are derived from product and service sales, less discounts and returns, including shipping and handling fees[245](index=245&type=chunk) - Cost of sales primarily includes manufacturing personnel, raw materials, depreciation, and allocated manufacturing overhead[246](index=246&type=chunk) - Operating expenses consist of sales and marketing (salaries, commissions, travel, congresses), general and administrative (executive, finance, legal, IT, amortization), and research and development (design, testing, regulatory approval, clinical studies, intellectual property costs)[247](index=247&type=chunk)[248](index=248&type=chunk)[249](index=249&type=chunk) - Other income (expense) includes interest income/expense and foreign currency gains/losses[250](index=250&type=chunk) - Income tax expense is affected by the mix of U.S. and foreign taxable income, permanent items, discrete items, and valuation allowances[251](index=251&type=chunk) [Results of Operations](index=47&type=section&id=Results%20of%20Operations) Net sales increased by 11% in 2019, driven by acquisitions, while gross margin decreased due to product mix and foreign exchange, and the effective tax rate fluctuated Net Sales and Gross Profit Comparison (2019 vs. 2018, in thousands) | Metric | 2019 | 2018 | $ Change | % Change | | :----------- | :-------- | :-------- | :------- | :------- | | Net sales | $117,232 | $105,568 | $11,664 | 11% | | Gross profit | $79,853 | $73,939 | $5,914 | 8% | | Gross margin | 68.1% | 70.0% | (1.9%) | * | - Net sales increase in 2019 was primarily driven by embolectomy catheters (**$4.3 million**, including Syntel/Python acquisition), valvulotomes (**$1.6 million**, including Tru-Incise/Chevalier acquisitions), polyester grafts (**$1.5 million**, including Cardial products), and human tissue cryopreservation services (**$1.4 million**)[253](index=253&type=chunk) - Gross margin decreased by **190 basis points** in 2019 due to an unfavorable product mix, including recently acquired lower-margin products, and unfavorable foreign exchange rate changes, partially offset by higher average selling prices and manufacturing efficiencies[258](index=258&type=chunk) Operating Expenses Comparison (2019 vs. 2018, in thousands) | Expense Category | 2019 | 2018 | $ Change | % Change | | :------------------------- | :-------- | :-------- | :------- | :------- | | Sales and marketing | $30,339 | $27,318 | $3,021 | 11% | | General and administrative | $19,055 | $17,689 | $1,366 | 8% | | Research and development | $9,276 | $8,197 | $1,079 | 13% | | Gain on divestitures/acquisitions | - | $(7,474) | $7,474 | * | - The 2018 gain on divestitures and acquisitions included **$5.9 million** from the sale of Reddick product lines and **$1.6 million** from the bargain purchase of Cardial assets[263](index=263&type=chunk)[280](index=280&type=chunk) Net Sales and Gross Profit Comparison (2018 vs. 2017, in thousands) | Metric | 2018 | 2017 | $ Change | % Change | | :----------- | :-------- | :-------- | :------- | :------- | | Net sales | $105,568 | $100,867 | $4,701 | 5% | | Gross profit | $73,939 | $70,697 | $3,242 | 5% | | Gross margin | 70.0% | 70.1% | (0.1%) | * | - Net sales increase in 2018 was primarily driven by biologic vascular patches (**$1.7 million**), carotid shunts (**$1.2 million**), embolectomy catheters (**$1.2 million**), and human tissue cryopreservation services (**$1.2 million**)[269](index=269&type=chunk) - The effective tax rate was **17.3% in 2019**, **19.3% in 2018**, and **18.6% in 2017**, differing from the U.S. statutory rate due to factors like stock option exercises, foreign earnings, and valuation allowances[265](index=265&type=chunk)[282](index=282&type=chunk)[496](index=496&type=chunk) [Liquidity and Capital Resources](index=51&type=section&id=Liquidity%20and%20Capital%20Resources) The company's liquidity is strong, with cash and investments sufficient for future needs, though cash used in investing activities significantly increased in 2019 due to acquisitions Cash and Investments (in thousands) | Metric | Dec 31, 2019 | Dec 31, 2018 | | :------------------------- | :----------- | :----------- | | Cash and cash equivalents | $11,786 | $26,318 | | Short-term marketable securities | $20,895 | $21,668 | - The company's cash and cash equivalents, along with investments, are expected to be sufficient to meet anticipated cash requirements for at least the next **twelve months**[288](index=288&type=chunk) Cash Flows Summary (in thousands) | Activity | 2019 | 2018 | 2017 | | :----------------- | :--------- | :--------- | :--------- | | Operating activities | $14,179 | $19,506 | $22,868 | | Investing activities | $(24,100) | $(7,055) | $(28,958) | | Financing activities | $(4,622) | $(4,416) | $80 | - Net cash used in investing activities significantly increased in 2019 to **$24.1 million**, primarily due to **$21.2 million** in cash paid for acquisitions and **$3.8 million** for property and equipment[292](index=292&type=chunk) - Cash dividends declared per common share increased from **$0.22 in 2017** to **$0.34 in 2019**[229](index=229&type=chunk)[298](index=298&type=chunk) Contractual Obligations (as of Dec 31, 2019, in thousands) | Obligation | Total | 1 Year or Less | 2-3 Years | 3-4 Years | 5 or More Years | | :------------------------ | :------- | :------------- | :-------- | :-------- | :-------------- | | Operating leases | $20,272 | $2,419 | $4,292 | $3,259 | $10,301 | | Inventory purchase commitments | $1,465 | $1,465 | - | - | - | [Critical Accounting Policies and Estimates](index=53&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) Key accounting policies involve revenue recognition, accounts receivable, inventory, stock-based compensation, goodwill, and income taxes, all requiring significant management judgment - Key accounting policies requiring significant judgment include revenue recognition (especially for consigned inventory and human tissue cryopreservation services), accounts receivable allowances, inventory valuation, stock-based compensation, and the valuation of goodwill and other intangibles[303](index=303&type=chunk)[304](index=304&type=chunk)[310](index=310&type=chunk)[313](index=313&type=chunk)[315](index=315&type=chunk)[318](index=318&type=chunk) - Revenue is recognized when control of goods or services transfers to the customer, typically at shipment, or when consigned inventory is consumed[305](index=305&type=chunk)[307](index=307&type=chunk) - The allowance for doubtful accounts is based on historical experience and specific customer collection issues, with close monitoring of receivables in regions like Italy and Spain due to potential payment delays[310](index=310&type=chunk)[311](index=311&type=chunk) - Goodwill and other intangible assets are evaluated for impairment annually or more frequently if indicators are present, using qualitative factors and, if necessary, a two-step impairment test or discounted cash flow methods[318](index=318&type=chunk)[320](index=320&type=chunk) - Stock-based compensation expense for stock options and restricted stock units (RSUs) is recognized over the vesting period, with fair values determined using the Black-Scholes model for options[315](index=315&type=chunk)[316](index=316&type=chunk) - Income taxes are accounted for under the asset and liability method, with deferred taxes and valuation allowances based on expected future taxable income and tax strategies[322](index=322&type=chunk)[323](index=323&type=chunk) [Recent Accounting Pronouncements](index=59&type=section&id=Recent%20Accounting%20Pronouncements) The company adopted ASU 2016-02 (Leases) in 2019, and other ASUs effective in 2020-2021 are not expected to materially impact financial statements - The company adopted **ASU No. 2016-02, Leases (Topic 842)**, on **January 1, 2019**, recognizing lease liabilities of **$7.0 million** and right-of-use assets of **$6.5 million**, with no material cumulative-effect adjustment to retained earnings[326](index=326&type=chunk) - ASU 2016-13 (Credit Losses), ASU 2018-13 (Fair Value Measurement), ASU 2017-04 (Goodwill Impairment), and ASU 2019-12 (Income Taxes) are effective for the company starting **January 1, 2020**, or **January 1, 2021**, and are not expected to have a material impact on financial statements[327](index=327&type=chunk)[328](index=328&type=chunk)[329](index=329&type=chunk)[330](index=330&type=chunk) [Off-Balance Sheet Arrangements](index=59&type=section&id=Off-Balance%20Sheet%20Arrangements) As of December 31, 2019, the company had no off-balance sheet arrangements or relationships with unconsolidated entities - As of **December 31, 2019**, the company did not have any off-balance sheet arrangements, relationships with unconsolidated entities, or engage in non-exchange traded contracts[331](index=331&type=chunk) - LeMaitre Vascular is a medical device company focused on peripheral vascular disease, with strategies including direct sales force expansion, complementary acquisitions, and internal product development[232](index=232&type=chunk)[239](index=239&type=chunk)[241](index=241&type=chunk) - The company has experienced success in lower-rivalry niche product segments like valvulotomes and biologic vascular patches, but faces increased competition in the latter[236](index=236&type=chunk) - Acquisitions in 2019 included Tru-Incise valve cutters (**$8.0 million**) and CardioCel/VascuCel biologic patches (**$15.5 million** plus contingencies), while 2018 saw the acquisition of Applied Medical's embolectomy catheter business (**$14.2 million**) and Cardial (**$2.3 million**)[241](index=241&type=chunk)[455](index=455&type=chunk)[460](index=460&type=chunk)[465](index=465&type=chunk)[469](index=469&type=chunk) - Manufacturing consolidation into Burlington, Massachusetts facilities is ongoing, with transfers for acquired embolectomy catheters and Omniflow biosynthetic grafts expected to complete in **2020**[242](index=242&type=chunk) - Foreign currency exchange rate changes decreased reported sales by approximately **$2.3 million in 2019** compared to 2018[244](index=244&type=chunk) Net Sales and Gross Profit (2019 vs. 2018, in thousands) | Metric | 2019 | 2018 | $ Change | % Change | | :----------- | :-------- | :-------- | :------- | :------- | | Net sales | $117,232 | $105,568 | $11,664 | 11% | | Gross profit | $79,853 | $73,939 | $5,914 | 8% | | Gross margin | 68.1% | 70.0% | (1.9%) | * | Net Sales by Geography (2019 vs. 2018, in thousands) | Geography | 2019 | 2018 | $ Change | % Change | | :----------------------- | :------- | :------- | :------- | :------- | | Americas | $69,359 | $63,649 | $5,710 | 9% | | Europe, Middle East, Africa | $39,480 | $35,319 | $4,161 | 12% | | Asia/Pacific Rim | $8,393 | $6,600 | $1,793 | 27% | Operating Expenses (2019 vs. 2018, in thousands) | Expense Category | 2019 | 2018 | $ Change | % Change | | :------------------------- | :-------- | :-------- | :------- | :------- | | Sales and marketing | $30,339 | $27,318 | $3,021 | 11% | | General and administrative | $19,055 | $17,689 | $1,366 | 8% | | Research and development | $9,276 | $8,197 | $1,079 | 13% | | Gain on divestitures/acquisitions | - | $(7,474) | $7,474 | * | Net Income and EPS (2019 vs. 2018) | Metric | 2019 | 2018 | | :--------- | :---- | :---- | | Net income | $17,934 | $22,943 | | Basic EPS | $0.91 | $1.18 | | Diluted EPS| $0.88 | $1.13 | Cash Flow Summary (2019 vs. 2018, in thousands) | Activity | 2019 | 2018 | | :----------------- | :--------- | :--------- | | Operating activities | $14,179 | $19,506 | | Investing activities | $(24,100) | $(7,055) | | Financing activities | $(4,622) | $(4,416) | - Cash and cash equivalents decreased from **$26.3 million in 2018** to **$11.8 million in 2019**, primarily due to increased cash used in investing activities for acquisitions and capital expenditures[285](index=285&type=chunk)[292](index=292&type=chunk) - The Board of Directors authorized a **$10.0 million share repurchase program**, extended to **February 14, 2021**, though no repurchases have been made under this program to date[286](index=286&type=chunk)[508](index=508&type=chunk) - Contractual obligations as of **December 31, 2019**, include **$20.3 million** in operating leases (expiring through **2030**) and **$1.5 million** in inventory purchase commitments[299](index=299&type=chunk)[300](index=300&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=59&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company faces market risks primarily from foreign currency fluctuations, particularly the Euro and British pound, impacting revenue and costs, while interest rate risk is minimal due to short-term investments - The company is exposed to foreign currency risk, as **46% of total revenue in 2019** was from outside the United States, with significant operating costs also denominated in foreign currencies[333](index=333&type=chunk) - Major foreign currency exposures include the Euro, British pound, Canadian dollar, Australian dollar, and Japanese yen[333](index=333&type=chunk) - A hypothetical **10% change** in foreign currency exchange rates could have increased or decreased consolidated results of operations by approximately **$1.2 million for 2019**[334](index=334&type=chunk) - Interest rate risk is not material due to the short maturities of cash, cash equivalents, and short-term marketable securities[335](index=335&type=chunk) [Financial Statements and Supplementary Data](index=60&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section incorporates the consolidated financial statements and notes for 2017-2019, including balance sheets, statements of operations, comprehensive income, stockholders' equity, and cash flows - The consolidated financial statements for the years ended **December 31, 2019, 2018, and 2017** are incorporated by reference[336](index=336&type=chunk) [Consolidated Financial Statements](index=70&type=section&id=Consolidated%20Financial%20Statements) The consolidated financial statements, including the independent auditor's report, balance sheets, income statements, and cash flow statements, are presented for 2017-2019 - The financial statements include the Report of Independent Registered Public Accounting Firm, Consolidated Balance Sheets, Statements of Operations, Comprehensive Income, Changes in Stockholders' Equity, and Cash Flows[380](index=380&type=chunk) - Grant Thornton LLP issued an unqualified opinion on the consolidated financial statements as of and for the year ended **December 31, 2019**[383](index=383&type=chunk) - The company changed its method of accounting for leases as of **January 1, 2019**, due to the adoption of **ASC Topic 842, Leases**[385](index=385&type=chunk) Consolidated Balance Sheets (as of Dec 31, in thousands) | Asset/Liability/Equity | 2019 | 2018 | | :--------------------- | :-------- | :-------- | | Cash and cash equivalents | $11,786 | $26,318 | | Total current assets | $92,092 | $94,017 | | Total assets | $188,341 | $153,088 | | Total current liabilities | $20,851 | $19,758 | | Total liabilities | $40,200 | $22,853 | | Total stockholders' equity | $148,141 | $130,235 | Consolidated Statements of Operations (Years Ended Dec 31, in thousands) | Metric | 2019 | 2018 | 2017 | | :------------------------- | :-------- | :-------- | :-------- | | Net sales | $117,232 | $105,568 | $100,867 | | Gross profit | $79,853 | $73,939 | $70,697 | | Income from operations | $21,183 | $28,209 | $21,103 | | Net income | $17,934 | $22,943 | $17,177 | | Basic EPS | $0.91 | $1.18 | $0.91 | | Diluted EPS | $0.88 | $1.13 | $0.86 | Consolidated Statements of Cash Flows (Years Ended Dec 31, in thousands) | Activity | 2019 | 2018 | 2017 | | :----------------- | :--------- | :--------- | :--------- | | Operating activities | $14,179 | $19,506 | $22,868 | | Investing activities | $(24,100) | $(7,055) | $(28,958) | | Financing activities | $(4,622) | $(4,416) | $80 | [Changes In and Disagreements With Accountants on Accounting and Financial Disclosure](index=60&type=section&id=Item%209.%20Changes%20In%20and%20Disagreements%20With%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) No changes in or disagreements with accountants on accounting and financial disclosure were reported - Not Applicable[337](index=337&type=chunk) [Controls and Procedures](index=61&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that disclosure controls and internal control over financial reporting were effective as of December 31, 2019, a conclusion affirmed by the independent auditor - Management concluded that the company's disclosure controls and procedures were effective at reasonable assurance levels as of **December 31, 2019**[340](index=340&type=chunk) - Management assessed and concluded that the company's internal control over financial reporting was effective as of **December 31, 2019**, based on criteria established in the **2013 Internal Control—Integrated Framework issued by COSO**[342](index=342&type=chunk)[343](index=343&type=chunk) - Grant Thornton LLP, the independent registered public accounting firm, expressed an unqualified opinion that the company maintained effective internal control over financial reporting as of **December 31, 2019**[347](index=347&type=chunk) - There were no material changes in internal control over financial reporting during the fiscal quarter ended **December 31, 2019**[344](index=344&type=chunk) [Other Information](index=63&type=section&id=Item%209B.%20Other%20Information) No other information is reported under this item - Not Applicable[354](index=354&type=chunk) PART III This section covers directors, executive officers, corporate governance, compensation, security ownership, related transactions, and accounting fees [Directors, Executive Officers and Corporate Governance](index=63&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) Information on directors, executive officers, corporate governance, and Section 16(a) compliance is incorporated by reference from the 2020 proxy statement - Information on directors, executive officers, and corporate governance is incorporated by reference from the **2020 definitive proxy statement**[355](index=355&type=chunk) - Compliance with **Section 16(a) of the Exchange Act** is also incorporated by reference from the **2020 definitive proxy statement**[356](index=356&type=chunk) - The company's Code of Business Conduct and Ethics and charters of its Audit, Compensation, and Nominating and Corporate Governance Committees are available on its website[357](index=357&type=chunk) [Executive Compensation](index=63&type=section&id=Item%2011.%20Executive%20Compensation) Executive compensation information is incorporated by reference from the 2020 definitive proxy statement - Information on executive compensation is incorporated by reference from the **2020 definitive proxy statement**[358](index=358&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=63&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) Security ownership information for beneficial owners and management, along with equity compensation plan details, is incorporated by reference from the 2020 proxy statement - Information on security ownership of certain beneficial owners and management is incorporated by reference from the **2020 definitive proxy statement**[359](index=359&type=chunk) Equity Compensation Plan Information (as of Dec 31, 2019) | Plan Category | Number of securities to be issued upon exercise of outstanding options, warrants and rights (a) | Weighted-average exercise price of outstanding options, warrants and rights (b) | Number of securities remaining available for future issuance under equity compensation plans, excluding securities reflected in column (a) (c) | | :--------------------------------------------- | :-------------------------------------------------------------------------------------------- | :------------------------------------------------------------------------------ | :------------------------------------------------------------------------------------------------------------------------------------------------- | | Equity compensation plans approved by security holders | 1,235,775 | $23.64 | 1,089,749 | | Equity compensation plans not approved by security holders | - | - | - | | Total | 1,235,775 | $23.64 | 1,089,749 | [Certain Relationships and Related Transactions, and Director Independence](index=64&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) Information on certain relationships and related transactions, and director independence is incorporated by reference from the 2020 definitive proxy statement - Information on certain relationships and related transactions, and director independence is incorporated by reference from the **2020 definitive proxy statement**[362](index=362&type=chunk) [Principal Accounting Fees and Services](index=64&type=section&id=Item%2014.%20Principal%20Accounting%20Fees%20and%20Services) Principal accounting fees and services information is incorporated by reference from the 2020 definitive proxy statement - Information on principal accounting fees and services is incorporated by reference from the **2020 definitive proxy statement**[363](index=363&type=chunk) PART IV This section details exhibits and financial statement schedules filed with the Annual Report on Form 10-K, including certifications [Exhibits and Financial Statement Schedules](index=64&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) This item lists all documents filed with the Annual Report on Form 10-K, including financial statements, various exhibits, and required certifications - This item lists all documents filed as part of the report, including consolidated financial statements, various exhibits, and certifications[365](index=365&type=chunk) - Exhibits include asset purchase agreements (e.g., Admedus Ltd, Applied Medical Resources Corporation), lease agreements for facilities, and executive compensation plans[366](index=366&type=chunk)[368](index=368&type=chunk)[370](index=370&type=chunk) - Certifications by the Chief Executive Officer and Chief Financial Officer, as required by **Rule 13a-14(a)** and **Section 1350 of Chapter 36 of Title 18 of the United States Code**, are included[370](index=370&type=chunk) [Form 10-K Summary](index=68&type=section&id=Item%2016.%20Form%2010-K%20Summary) This item is not applicable to the company's filing - Not applicable[372](index=372&type=chunk)

Financial Data and Key Metrics Changes - In Q4 2019, the company reported record sales of $30.2 million, an increase of 6% year-over-year [7] - Adjusted operating income for Q4 2019 was $4.9 million, down 12% from Q4 2018, primarily due to lower gross margins and increased operating expenses [15] - The gross margin for Q4 2019 was 66%, a decline of 1.7% compared to the prior year [14] - For the full year 2019, organic growth improved to 6%, with adjusted operating income growth of 3% [10][11] Business Line Data and Key Metrics Changes - Biologics accounted for 30% of sales in Q4 2019, with significant contributions from biologic patches and the recently acquired CardioCel patches generating $1.4 million in sales [9][7] - The Tru-Incise acquisition contributed $500,000 in sales during Q4 2019 [7] Market Data and Key Metrics Changes - The Americas experienced a record quarter with a 6% growth, Europe grew by 4%, and Asia-Pacific saw a significant increase of 20%, driven by a 53% growth in exports [8] - Direct sales in Asia-Pacific markets of China, Japan, and Australia all grew by 10% [8] Company Strategy and Development Direction - The company plans to leverage its expertise in biologics through the CardioCel acquisition and is launching cardiac allografts in the U.S. and Canada [9] - The company aims for 10% sales growth and 17% operating income growth in 2020, indicating a focus on expanding its product offerings and market reach [11] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the challenges posed by the transition from MDD to MDR in Europe, which requires more costly testing and data collection [19] - The company expects to resolve these regulatory challenges in H1 2020 and has taken steps to mitigate potential sales impacts by overstocking inventory [20] - Management expressed confidence in achieving record revenue growth in 2020, driven by acquisitions and organic growth [16] Other Important Information - The Board increased the dividend payout by 12%, marking the ninth consecutive year of dividend increases [12] - The company ended Q4 2019 with $32.7 million in cash, a decrease attributed to acquisition-related payments and capital expenditures [17] Q&A Session Summary Question: Can you walk through the quarterly growth and operating margin leverage for 2020? - Management indicated that sales growth would be fairly even throughout the year, with expectations for gross margin improvements in Q2 due to manufacturing efficiencies [23][24] Question: What are your thoughts on the medium to long-term trajectory of gross margin? - Management acknowledged that gross margin is important and that recent acquisitions have impacted margins, but they expect to improve margins over time as integration progresses [26] Question: Can you clarify the restrained 2020 OpEx spending? - Management clarified that OpEx is expected to grow by 6% in 2020, down from 10% in 2019, and emphasized that cost-cutting initiatives would not significantly hinder growth [30][31] Question: What is the expected organic growth for 2020? - Management confirmed expectations of 10% reported growth and 5% organic growth, with some headwinds from the OEM business and regulatory changes [32] Question: What was the pricing trend in Q4? - Pricing was down approximately 3% in Q4, driven by a large disposables order in China, while unit sales were up 4.5% [36] Question: Can you provide a breakdown of the rep count at the end of the year? - The company reported 54 reps in the Americas, 40 in Europe, and 18 in Asia-Pacific, totaling 112 worldwide [43] Question: What is the expected contribution from the Admedus acquisition? - Management projected around $7 million in revenue from the CardioCel and VascuCel products for 2020 [50] Question: How much is being spent on MDD to MDR transition? - Management estimated an incremental cost of about $1 million for the transition in 2020 [78]

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2019 Or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to . Commission File Number 001-33092 LEMAITRE VASCULAR, INC. (Exact name of registrant as specified in its charter) Delaware 04-2825458 ...

[Part I. Financial Information](index=4&type=section&id=Part%20I.%20Financial%20Information) This section provides LeMaitre Vascular's unaudited consolidated financial statements and management's analysis of financial condition and operations [Item 1. Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) This section presents LeMaitre Vascular's unaudited consolidated financial statements and related notes for the specified periods [Consolidated Balance Sheets](index=4&type=section&id=Consolidated%20Balance%20Sheets) The consolidated balance sheets show the company's financial position as of June 30, 2019, compared to December 31, 2018 Consolidated Balance Sheets (in thousands) | Metric | June 30, 2019 (in thousands) | December 31, 2018 (in thousands) | | :-------------------------------- | :----------------------------- | :----------------------------- | | Cash and cash equivalents | $13,264 | $26,318 | | Short-term marketable securities | $34,979 | $21,668 | | Total current assets | $98,159 | $94,017 | | Total assets | $162,661 | $153,088 | | Total current liabilities | $17,422 | $19,758 | | Total liabilities | $25,124 | $22,853 | | Total stockholders' equity | $137,537 | $130,235 | [Unaudited Consolidated Statements of Operations](index=5&type=section&id=Unaudited%20Consolidated%20Statements%20of%20Operations) These statements detail the company's financial performance for the three and six months ended June 30, 2019 and 2018 Unaudited Consolidated Statements of Operations (in thousands, except per share data) | Metric (in thousands, except per share data) | Three months ended June 30, 2019 | Three months ended June 30, 2018 | Six months ended June 30, 2019 | Six months ended June 30, 2018 | | :------------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net sales | $29,483 | $27,020 | $57,962 | $53,014 | | Gross profit | $20,315 | $18,992 | $39,779 | $37,466 | | Income from operations | $5,915 | $11,541 | $10,350 | $16,403 | | Net income | $4,624 | $8,751 | $8,137 | $12,604 | | Basic EPS | $0.23 | $0.45 | $0.41 | $0.65 | | Diluted EPS | $0.23 | $0.43 | $0.40 | $0.62 | | Cash dividends declared per common share | $0.085 | $0.070 | $0.170 | $0.140 | [Unaudited Consolidated Statements of Comprehensive Income](index=6&type=section&id=Unaudited%20Consolidated%20Statements%20of%20Comprehensive%20Income) This statement presents comprehensive income for the three and six months ended June 30, 2019 and 2018, including other comprehensive income Unaudited Consolidated Statements of Comprehensive Income (in thousands) | Metric (in thousands) | Three months ended June 30, 2019 | Three months ended June 30, 2018 | Six months ended June 30, 2019 | Six months ended June 30, 2018 | | :-------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income | $4,624 | $8,751 | $8,137 | $12,604 | | Foreign currency translation adjustment, net | $208 | $(1,223) | $(53) | $(895) | | Unrealized gain (loss) on short-term marketable securities | $66 | $22 | $135 | $(23) | | Total other comprehensive income (loss) | $274 | $(1,201) | $82 | $(918) | | Comprehensive income | $4,898 | $7,550 | $8,219 | $11,686 | [Unaudited Consolidated Statements of Stockholders' Equity](index=7&type=section&id=Unaudited%20Consolidated%20Statements%20of%20Stockholders'%20Equity) These statements show changes in stockholders' equity components for the six-month periods ended June 30, 2019 and 2018 Unaudited Consolidated Statements of Stockholders' Equity (in thousands) | Metric (in thousands) | Balance at Dec 31, 2018 | Balance at June 30, 2019 | | :-------------------- | :---------------------- | :----------------------- | | Common Stock Amount | $211 | $213 | | Additional Paid-in Capital | $98,442 | $100,890 | | Retained Earnings | $45,831 | $50,624 | | Accumulated Other Comprehensive Income (Loss) | $(3,900) | $(3,818) | | Treasury Stock Amount | $(10,349) | $(10,372) | | Total Stockholders' Equity | $130,235 | $137,537 | [Unaudited Consolidated Statements of Cash Flows](index=9&type=section&id=Unaudited%20Consolidated%20Statements%20of%20Cash%20Flows) This statement outlines cash flows from operating, investing, and financing activities for the six months ended June 30, 2019 and 2018 Unaudited Consolidated Statements of Cash Flows (in thousands) | Metric (in thousands) | Six months ended June 30, 2019 | Six months ended June 30, 2018 | | :-------------------- | :----------------------------- | :----------------------------- | | Net cash provided by operating activities | $4,115 | $8,627 | | Net cash used in investing activities | $(14,826) | $(4,587) | | Net cash provided by financing activities | $(2,418) | $(3,113) | | Net increase (decrease) in cash and cash equivalents | $(13,054) | $542 | | Cash and cash equivalents at end of period | $13,264 | $19,638 | [Notes to Unaudited Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Unaudited%20Consolidated%20Financial%20Statements) These notes provide detailed explanations and disclosures for the unaudited consolidated financial statements [1. Organization and Basis for Presentation](index=10&type=section&id=1.%20Organization%20and%20Basis%20for%20Presentation) This section describes LeMaitre Vascular's business, GAAP basis for interim statements, and revenue recognition policy - LeMaitre Vascular develops, manufactures, and markets medical devices and implants for vascular surgery, and processes/cryopreserves human tissues for implantation. The company operates in a **single segment**[25](index=25&type=chunk) - Revenue is recognized when performance obligations are satisfied, typically at shipment or when consigned inventory is consumed, net of allowances for returns and discounts[33](index=33&type=chunk) Revenue Disaggregation by Geographic Area (in thousands) | Geographic Area | Three months ended June 30, 2019 | Three months ended June 30, 2018 | Six months ended June 30, 2019 | Six months ended June 30, 2018 | | :---------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Americas | $17,511 | $16,082 | $33,886 | $31,942 | | Europe, Middle East and Africa | $10,014 | $9,074 | $20,027 | $17,829 | | Asia/Pacific Rim | $1,958 | $1,864 | $4,049 | $3,243 | | Total | $29,483 | $27,020 | $57,962 | $53,014 | - The company adopted ASU No. 2016-02, Leases (Topic 842), on January 1, 2019, recognizing lease liabilities of **$7.0 million** and right-of-use assets of **$6.5 million**, with no cumulative-effect adjustment to retained earnings[37](index=37&type=chunk) [2. Income Tax Expense](index=13&type=section&id=2.%20Income%20Tax%20Expense) This note details the company's income tax expense, deferred tax assets/liabilities, and unrecognized tax benefits - The company's income tax expense varies from the statutory rate due to federal and state tax credits, permanent items, different statutory rates from foreign subsidiaries, and discrete stock option exercises[44](index=44&type=chunk) Unrecognized Tax Benefits (in thousands) | Metric | Six months ended June 30, 2019 | | :----------------------------------------- | :----------------------------- | | Unrecognized tax benefits as of Dec 31, 2018 | $711 | | Additions for tax positions of current year | $37 | | Additions for tax positions of prior years | $5 | | Unrecognized tax benefits as of June 30, 2019 | $753 | - As of June 30, 2019, the gross amount of unrecognized tax benefits was **$753,000**, with tax years remaining subject to examination from 2015 forward in the United States and 2012 forward in foreign jurisdictions[45](index=45&type=chunk) [3. Inventories and Other Deferred Costs](index=14&type=section&id=3.%20Inventories%20and%20Other%20Deferred%20Costs) This section breaks down inventories and other deferred costs, including raw materials, work-in-process, and finished products Inventories and Other Deferred Costs (in thousands) | Category | June 30, 2019 | December 31, 2018 | | :---------------------- | :------------ | :---------------- | | Raw materials | $4,399 | $4,085 | | Work-in-process | $5,477 | $5,095 | | Finished products | $18,824 | $16,391 | | Other deferred costs | $3,544 | $1,817 | | Total inventory and other deferred costs | $32,243 | $27,388 | - Other deferred costs primarily relate to the RestoreFlow allograft offering, accumulating costs for preservation, processing, and quarantine of human vascular tissues, which are not held as inventory due to federal law[47](index=47&type=chunk) [4. Acquisitions and Divestitures](index=14&type=section&id=4.%20Acquisitions%20and%20Divestitures) This note details the company's acquisition activities, including Cardial and Applied Medical, and the Reddick product line divestiture - Acquisitions are accounted for using the acquisition method, with goodwill arising from expected synergies such as sales channel expansion and manufacturing consolidation[48](index=48&type=chunk)[50](index=50&type=chunk) Cardial Acquisition Summary (in thousands) | Metric | Allocated Fair Value (in thousands) | | :----------------- | :---------------------------------- | | Inventory | €2,419 | | Land and building | €750 | | Equipment and supplies | €94 | | Intangible assets | €623 | | Bargain purchase gain | (€1,946) | | Purchase price | €1,940 | - On October 22, 2018, LeMaitre acquired Cardial's business assets for **€2.0 million ($2.3 million)**, resulting in a bargain purchase gain of **€1.4 million ($1.6 million)** net of deferred taxes[51](index=51&type=chunk)[52](index=52&type=chunk)[53](index=53&type=chunk) Applied Medical Acquisition Summary (in thousands) | Metric | Allocated Fair Value (in thousands) | | :----------------- | :---------------------------------- | | Inventory | $739 | | Equipment and supplies | $416 | | Intangible assets | $6,527 | | Goodwill | $6,361 | | Purchase price | $14,043 | - On September 20, 2018, LeMaitre acquired Applied Medical's embolectomy catheter business for **$14.2 million**, including **$3.2 million** in deferred payments, resulting in **$6.361 million** in goodwill[55](index=55&type=chunk)[56](index=56&type=chunk)[57](index=57&type=chunk) - On April 5, 2018, the company divested its Reddick cholangiogram catheter and Reddick-Saye screw product lines for **$7.4 million**, recording a gain of **$5.9 million**[60](index=60&type=chunk) - Subsequent to the quarter, on July 12, 2019, LeMaitre agreed to purchase the remaining assets of UreSil, LLC's Tru-Incise valve cutter business for **$8.0 million**[61](index=61&type=chunk) [5. Goodwill and Other Intangibles](index=18&type=section&id=5.%20Goodwill%20and%20Other%20Intangibles) This note details the composition of goodwill and other intangible assets, their carrying value, and amortization expense Goodwill and Other Intangible Assets (in thousands) | Category | June 30, 2019 Net Carrying Value | December 31, 2018 Net Carrying Value | | :------------------------------------- | :------------------------------- | :----------------------------------- | | Goodwill | $29,860 | $29,868 | | Product technology and intellectual property | $5,476 | $6,002 | | Trademarks, tradenames and licenses | $620 | $685 | | Customer relationships | $6,173 | $6,259 | | Other intangible assets | $363 | $746 | | Total identifiable intangible assets | $12,632 | $13,692 | - Intangible assets are amortized over useful lives ranging from **2 to 16 years**, with a weighted-average amortization period of **9.7 years** as of June 30, 2019[64](index=64&type=chunk) Amortization Expense (in thousands) | Period | Amortization Expense | | :-------------------- | :------------------- | | Three months ended June 30, 2019 | $556 | | Three months ended June 30, 2018 | $414 | | Six months ended June 30, 2019 | $1,111 | | Six months ended June 30, 2018 | $832 | [6. Leases](index=20&type=section&id=6.%20Leases) This note describes the company's operating leases, the impact of ASU No. 2016-02 adoption, and future lease commitments - The company's operations are primarily conducted in leased facilities, all classified as operating leases, with principal facilities in Burlington, Massachusetts, and international headquarters in Sulzbach, Germany[66](index=66&type=chunk) - Upon adoption of ASU No. 2016-02 on January 1, 2019, the company recognized lease liabilities and right-of-use assets, using an estimated incremental borrowing rate of **5.25%**[68](index=68&type=chunk)[69](index=69&type=chunk) Lease Information (in thousands) | Metric | Three months ended June 30, 2019 | Six months ended June 30, 2019 | | :----------------------------------------- | :------------------------------- | :----------------------------- | | Operating lease cost | $432 | $854 | | Short-term lease cost | $63 | $131 | | Total lease cost | $495 | $985 | | Cash paid for operating lease liabilities | $445 | $959 | | Right-of-use assets obtained | $594 | $810 | | Weighted average remaining lease term (years) | 4.1 | 4.1 | | Weighted average discount rate | 5.25% | 5.25% | Minimum Noncancelable Operating Lease Rental Commitments (in thousands) | Period | Amount | | :-------------------- | :----- | | Remainder of 2019 | $1,080 | | Year ending Dec 31, 2020 | $1,997 | | Year ending Dec 31, 2021 | $1,863 | | Year ending Dec 31, 2022 | $1,522 | | Year ending Dec 31, 2023 | $1,249 | | Adjustment to net present value | $(861) | | Minimum noncancelable lease liability | $6,850 | [7. Accrued Expenses and Other Long-term Liabilities](index=22&type=section&id=7.%20Accrued%20Expenses%20and%20Other%20Long-term%20Liabilities) This note provides a detailed breakdown of accrued expenses and other long-term liabilities, including compensation and taxes Accrued Expenses (in thousands) | Category | June 30, 2019 | December 31, 2018 | | :------------------------ | :------------ | :---------------- | | Compensation and related taxes | $6,476 | $7,973 | | Income and other taxes | $1,230 | $2,927 | | Professional fees | $111 | $43 | | Deferred revenue | $188 | $552 | | Other | $4,092 | $4,352 | | Total | $12,097 | $15,847 | - Deferred revenue of **$188,000** at June 30, 2019, relates to the Reddick product line divestiture and an associated transition services agreement, with **$364,000** recognized as revenue during the six months ended June 30, 2019[71](index=71&type=chunk) Other Long-term Liabilities (in thousands) | Category | June 30, 2019 | December 31, 2018 | | :------------------------ | :------------ | :---------------- | | Acquisition-related liabilities | $1,354 | $1,326 | | Deferred rent | $- | $530 | | Income taxes | $566 | $559 | | Other | $146 | $196 | | Total | $2,066 | $2,611 | [8. Segment and Enterprise-Wide Disclosures](index=22&type=section&id=8.%20Segment%20and%20Enterprise-Wide%20Disclosures) This note clarifies LeMaitre Vascular operates as a single segment and provides a breakdown of net sales by country - LeMaitre Vascular operates and manages its business as a **single operating segment**[72](index=72&type=chunk) Net Sales by Country (in thousands) | Country | Three months ended June 30, 2019 | Three months ended June 30, 2018 | Six months ended June 30, 2019 | Six months ended June 30, 2018 | | :-------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | United States | $16,006 | $14,864 | $30,764 | $29,684 | | Germany | $3,192 | $3,257 | $6,272 | $6,364 | | Other countries | $10,285 | $8,899 | $20,926 | $16,966 | | Net Sales | $29,483 | $27,020 | $57,962 | $53,014 | [9. Share-based Compensation](index=23&type=section&id=9.%20Share-based%20Compensation) This note details share-based compensation expense components, including stock options and restricted stock units, and their allocation Share-based Compensation Expense (in thousands) | Component | Three months ended June 30, 2019 | Three months ended June 30, 2018 | Six months ended June 30, 2019 | Six months ended June 30, 2018 | | :-------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Stock option awards | $432 | $391 | $879 | $780 | | Restricted stock units | $262 | $245 | $561 | $477 | | Total share-based compensation | $694 | $636 | $1,440 | $1,257 | Stock-based Compensation by Statement of Operations Line Item (in thousands) | Line Item | Three months ended June 30, 2019 | Three months ended June 30, 2018 | Six months ended June 30, 2019 | Six months ended June 30, 2018 | | :-------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Cost of sales | $76 | $83 | $158 | $148 | | Sales and marketing | $146 | $136 | $304 | $273 | | General and administrative | $418 | $351 | $837 | $702 | | Research and development | $54 | $66 | $141 | $134 | | Total | $694 | $636 | $1,440 | $1,257 | [10. Net Income per Share](index=24&type=section&id=10.%20Net%20Income%20per%20Share) This note provides the computation of basic and diluted net income per share for the three and six months ended June 30, 2019 and 2018 Net Income per Share (in thousands, except per share data) | Metric | Three months ended June 30, 2019 | Three months ended June 30, 2018 | Six months ended June 30, 2019 | Six months ended June 30, 2018 | | :----------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income available for common stockholders | $4,624 | $8,751 | $8,137 | $12,604 | | Basic earnings per share | $0.23 | $0.45 | $0.41 | $0.65 | | Diluted earnings per share | $0.23 | $0.43 | $0.40 | $0.62 | | Weighted average shares outstanding (Basic) | 19,680 | 19,320 | 19,660 | 19,301 | | Weighted average shares outstanding (Diluted) | 20,246 | 20,260 | 20,226 | 20,243 | [11. Stockholders' Equity](index=24&type=section&id=11.%20Stockholders'%20Equity) This note outlines the company's share repurchase program and details the quarterly cash dividend policy and payments - On February 14, 2019, the Board authorized a share repurchase program of up to **$10.0 million** of common stock, concluding on February 14, 2020, with no repurchases made under this program to date[77](index=77&type=chunk) Cash Dividends Declared (in thousands) | Record Date | Payment Date | Per Share Amount | Dividend Payment | | :------------- | :------------- | :--------------- | :--------------- | | Fiscal Year 2019 | | | | | March 22, 2019 | April 5, 2019 | $0.085 | $1,672 | | May 22, 2019 | June 5, 2019 | $0.085 | $1,672 | | Fiscal Year 2018 | | | | | March 22, 2018 | April 5, 2018 | $0.070 | $1,351 | | May 22, 2018 | June 7, 2018 | $0.070 | $1,353 | | August 22, 2018 | September 6, 2018 | $0.070 | $1,369 | | November 20, 2018 | December 6, 2018 | $0.070 | $1,372 | - On July 22, 2019, a quarterly cash dividend of **$0.085 per share** was approved, payable on September 5, 2019, totaling approximately **$1.7 million**[78](index=78&type=chunk)[79](index=79&type=chunk) [12. Supplemental Cash Flow Information](index=26&type=section&id=12.%20Supplemental%20Cash%20Flow%20Information) This note provides supplemental cash flow information, detailing cash paid for income taxes, net, for the specified periods Cash Paid for Income Taxes, Net (in thousands) | Period | Cash Paid for Income Taxes, Net | | :-------------------- | :------------------------------ | | Six months ended June 30, 2019 | $4,157 | | Six months ended June 30, 2018 | $3,140 | [13. Fair Value Measurements](index=26&type=section&id=13.%20Fair%20Value%20Measurements) This note describes the classification of assets and liabilities measured at fair value into Level 1, 2, or 3 categories - Fair value measurements are categorized into Level 1 (quoted prices in active markets), Level 2 (observable inputs other than Level 1), and Level 3 (unobservable inputs)[85](index=85&type=chunk) - Level 3 liabilities primarily relate to contingent consideration from the RestoreFlow allograft and ProCol biologic graft acquisitions, valued using management's forecast of future revenues and likelihood of continued employment[84](index=84&type=chunk) Rollforward of Fair Value of Level 3 Liabilities (in thousands) | Metric | Six months ended June 30, 2019 | Six months ended June 30, 2018 | | :----------------------------------- | :----------------------------- | :----------------------------- | | Beginning balance | $72 | $1,300 | | Payments | $(59) | $(1,142) |\n| Change in fair value included in earnings | $(13) | $42 | | Ending balance | $- | $200 | [14. Accumulated Other Comprehensive Loss](index=27&type=section&id=14.%20Accumulated%20Other%20Comprehensive%20Loss) This note details changes in accumulated other comprehensive loss, primarily from foreign currency translation adjustments Changes in Accumulated Other Comprehensive Loss (in thousands) | Metric | Six months ended June 30, 2019 | Six months ended June 30, 2018 | | :----------------------------------------- | :----------------------------- | :----------------------------- | | Beginning balance | $(3,900) | $(2,289) | | Other comprehensive income (loss) before reclassifications | $82 | $(918) | | Ending Balance | $(3,818) | $(3,207) | [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=28&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on LeMaitre Vascular's financial condition, results of operations, and critical accounting policies [Overview](index=28&type=section&id=Overview) LeMaitre Vascular focuses on peripheral vascular disease, employing strategies of niche products, direct sales, and strategic acquisitions - LeMaitre Vascular develops, manufactures, and markets medical devices and implants for peripheral vascular disease, with core product lines addressing an estimated **$900 million market**[91](index=91&type=chunk) - The company's strategy involves a focused call point, competing for low-rivalry niche products, expanding its worldwide direct sales force (**110 representatives** as of June 30, 2019), and acquiring/developing complementary vascular devices[91](index=91&type=chunk)[96](index=96&type=chunk)[101](index=101&type=chunk) - Biologic offerings (vascular patches, grafts, surgical glue) represented **35% of worldwide sales** in the current quarter, viewed favorably due to differentiated and growing segments[94](index=94&type=chunk) - Recent strategic activities include the divestiture of Reddick product lines (April 2018), acquisition of Applied Medical's embolectomy catheter business (September 2018), and acquisition of Cardial's polyester vascular grafts, valvulotomes, and surgical glue (October 2018)[101](index=101&type=chunk) - Manufacturing consolidation efforts include transferring ProCol biologic product line to Burlington (completed 2018) and initiating transfer of OmniFlow ovine biologic graft and Applied Medical embolectomy catheters to Burlington (expected completion 2019/early 2020)[102](index=102&type=chunk) - Foreign exchange rate changes decreased sales by approximately **$1.6 million** for the six months ended June 30, 2019, compared to the prior year[103](index=103&type=chunk) [Net Sales and Expense Components](index=31&type=section&id=Net%20Sales%20and%20Expense%20Components) This section defines the primary components of LeMaitre Vascular's net sales and expenses, including cost of sales and operating expenses - Net sales are derived from product and service sales, less discounts and returns, primarily direct-to-hospitals, with revenue recognized at shipment or product use for consigned inventory[104](index=104&type=chunk) - Cost of sales includes manufacturing personnel, raw materials, depreciation, and allocated overhead. Sales and marketing covers personnel, commissions, travel, and promotional activities. General and administrative includes executive, finance, HR salaries, legal, IT, and intangible asset amortization. R&D covers design, development, testing, and regulatory approval costs. Other income/expense includes interest and foreign currency gains/losses. Income tax expense is affected by the mix of taxable income, tax credits, and foreign statutory rates[105](index=105&type=chunk)[106](index=106&type=chunk)[107](index=107&type=chunk)[108](index=108&type=chunk)[109](index=109&type=chunk)[110](index=110&type=chunk) [Results of Operations](index=31&type=section&id=Results%20of%20Operations) This section provides a detailed comparison of the company's financial results for the three and six months ended June 30, 2019 versus 2018 [Net sales](index=32&type=section&id=Net%20sales) Net sales increased by 9% for both the three and six months ended June 30, 2019, driven by acquisitions and allografts Net Sales Performance (in thousands) | Metric | Three months ended June 30, 2019 | Three months ended June 30, 2018 | % Change | Six months ended June 30, 2019 | Six months ended June 30, 2018 | % Change | | :-------- | :------------------------------- | :------------------------------- | :------- | :----------------------------- | :----------------------------- | :------- | | Net sales | $29,483 | $27,020 | 9% | $57,962 | $53,014 | 9% | - The increase in net sales was primarily driven by embolectomy catheters (**+$1.1 million** for 3 months, **+$2.4 million** for 6 months), polyester grafts (**+$0.5 million** for 3 months, **+$1.0 million** for 6 months) from recent acquisitions, and allograft sales (**+$0.5 million** for 3 months, **+$0.4 million** for 6 months)[112](index=112&type=chunk) - A strengthening U.S. dollar decreased net sales by an estimated **$1.6 million** for the six months ended June 30, 2019[112](index=112&type=chunk) - Direct-to-hospital net sales constituted **94% of total net sales** for both the three and six-month periods ended June 30, 2019 and 2018[113](index=113&type=chunk) [Net sales by geography](index=32&type=section&id=Net%20sales%20by%20geography) Geographic net sales increased across all regions for the three and six months ended June 30, 2019, despite negative foreign currency impacts Net Sales by Geography (in thousands) | Geography | Three months ended June 30, 2019 | Three months ended June 30, 2018 | % Change | Six months ended June 30, 2019 | Six months ended June 30, 2018 | % Change | | :-------------------- | :------------------------------- | :------------------------------- | :------- | :----------------------------- | :----------------------------- | :------- | | Americas | $17,511 | $16,082 | 9% | $33,886 | $31,942 | 6% | | Europe, Middle East and Africa | $10,014 | $9,074 | 10% | $20,027 | $17,829 | 12% | | Asia/Pacific Rim | $1,958 | $1,864 | 5% | $4,049 | $3,243 | 25% | - Americas sales increased by **$1.4 million (9%)** for Q2 and **$1.9 million (6%)** for H1 2019, driven by embolectomy catheters, allografts, and carotid shunts, partially offset by powered phlebectomy systems[114](index=114&type=chunk) - EMEA sales increased by **$0.9 million (10%)** for Q2 and **$2.2 million (12%)** for H1 2019, primarily due to polyester grafts, OEM sales, valvulotomes, embolectomy catheters, and surgical glue, with a **$1.2 million** negative impact from a weaker Euro for H1[115](index=115&type=chunk) - APAC sales increased by **$0.1 million (5%)** for Q2 and **$0.8 million (25%)** for H1 2019, mainly from embolectomy catheters, carotid shunts, and anastomotic clips, partially offset by powered phlebectomy systems[116](index=116&type=chunk) [Gross Profit](index=32&type=section&id=Gross%20Profit) Gross profit increased for both periods, but gross margin decreased due to lower margins of acquired products and divestiture of higher-margin products Gross Profit and Margin Performance (in thousands) | Metric | Three months ended June 30, 2019 | Three months ended June 30, 2018 | Change | Six months ended June 30, 2019 | Six months ended June 30, 2018 | Change | | :---------- | :------------------------------- | :------------------------------- | :----- | :----------------------------- | :----------------------------- | :----- | | Gross profit | $20,315 | $18,992 | $1,323 | $39,779 | $37,466 | $2,313 | | Gross margin | 68.9% | 70.3% | (1.4%) | 68.6% | 70.7% | (2.1%) | - The decrease in gross margin was primarily due to the lower gross margins of recently acquired Syntel, Python embolectomy catheters, and Cardial products, and the divestiture of higher gross margin Reddick products in Q2 2018[118](index=118&type=chunk) [Operating Expenses](index=33&type=section&id=Operating%20Expenses) Operating expenses increased significantly due to higher sales and marketing costs from sales force expansion and increased research and development Operating Expenses (in thousands) | Expense Category | Three months ended June 30, 2019 | Three months ended June 30, 2018 | % Change | Six months ended June 30, 2019 | Six months ended June 30, 2018 | % Change | | :-------------------- | :------------------------------- | :------------------------------- | :------- | :----------------------------- | :----------------------------- | :------- | | Sales and marketing | $7,613 | $6,792 | 12% | $15,458 | $13,882 | 11% |\n| General and administrative | $4,531 | $4,547 | (0%) | $9,475 | $9,244 | 2% | | Research and development | $2,256 | $1,988 | 13% | $4,496 | $3,813 | 18% | | (Gain) loss on divestitures | $- | $(5,876) | * | $- | $(5,876) | * | | Total | $14,400 | $7,451 | 93% | $29,429 | $21,063 | 40% | - Sales and marketing expense increased due to higher personnel costs from sales force expansion and implementation of Salesforce CRM software[120](index=120&type=chunk) - General and administrative expense remained flat for the three-month period but increased **2%** for the six-month period, driven by higher compensation, bad debt, and facilities costs, offset by lower professional and acquisition costs[121](index=121&type=chunk) - Research and development expense increased **13%** for Q2 and **18%** for H1 2019, primarily for new versions of biologic vascular patches and powered phlebectomy devices, and testing related to OmniFlow biologic vascular graft production transfer[122](index=122&type=chunk) [Income tax expense](index=33&type=section&id=Income%20tax%20expense) Income tax provision decreased for both periods, with effective tax rates of 24.0% and 23.2% respectively, influenced by various tax items Income Tax Provision (in thousands) | Metric | Three months ended June 30, 2019 | Three months ended June 30, 2018 | Six months ended June 30, 2019 | Six months ended June 30, 2018 | | :-------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Tax provision | $1,464 | $2,796 | $2,464 | $3,859 | | Pre-tax income | $6,088 | $11,547 | $10,601 | $16,463 | | Effective tax rate | 24.0% | 24.2% | 23.2% | 23.4% | - The effective income tax rate for the current period is based on an estimated annual effective tax rate of **26.2%**, adjusted for discrete stock option exercises and other discrete items[123](index=123&type=chunk) [Liquidity and Capital Resources](index=35&type=section&id=Liquidity%20and%20Capital%20Resources) This section discusses the company's cash position, liquidity sources, operating and capital expenditure requirements, and cash flow activities Cash and Cash Equivalents (in thousands) | Metric | June 30, 2019 | December 31, 2018 | | :---------------------- | :------------ | :---------------- | | Cash and cash equivalents | $13,264 | $26,318 | | Short-term marketable securities | $34,979 | $21,668 | - The company has a **$10.0 million** share repurchase program authorized until February 14, 2020, with no repurchases made to date[128](index=128&type=chunk) - LeMaitre Vascular expects existing cash, cash equivalents, and investments to be sufficient to meet anticipated cash requirements for at least the next **twelve months**[131](index=131&type=chunk) Cash Flows Summary (in thousands) | Cash Flow Activity | Six months ended June 30, 2019 | Six months ended June 30, 2018 | Net Change | | :---------------------- | :----------------------------- | :----------------------------- | :--------- | | Operating activities | $4,115 | $8,627 | $(4,512) | | Investing activities | $(14,826) | $(4,587) | $(10,239) | | Financing activities | $(2,418) | $(3,113) | $695 | - Net cash provided by operating activities decreased to **$4.1 million** in H1 2019 from **$8.6 million** in H1 2018, primarily due to a net use of working capital driven by increased inventory and decreased accounts payable[133](index=133&type=chunk)[134](index=134&type=chunk) - Net cash used in investing activities increased to **$14.8 million** in H1 2019 from **$4.6 million** in H1 2018, mainly due to higher purchases of marketable securities and property/equipment, with no proceeds from divestitures in 2019[135](index=135&type=chunk)[136](index=136&type=chunk) - Net cash used in financing activities decreased to **$2.4 million** in H1 2019 from **$3.1 million** in H1 2018, primarily due to dividend payments offset by proceeds from stock option exercises[137](index=137&type=chunk)[138](index=138&type=chunk) [Off-Balance Sheet Arrangements](index=38&type=section&id=Off-Balance%20Sheet%20Arrangements) The company confirms it had no off-balance sheet arrangements as of June 30, 2019, and does not engage in structured finance entities - LeMaitre Vascular had no off-balance sheet arrangements as of June 30, 2019, and does not engage with structured finance or special purpose entities[140](index=140&type=chunk) [Critical Accounting Policies and Estimates](index=38&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) No material changes to critical accounting policies occurred during the six months ended June 30, 2019, except for ASU No. 2016-02 adoption - No material changes to critical accounting policies occurred during the six months ended June 30, 2019, except for the adoption of ASU No. 2016-02, Leases (Topic 842), effective January 1, 2019[141](index=141&type=chunk) [Recent Accounting Pronouncements](index=38&type=section&id=Recent%20Accounting%20Pronouncements) This section refers to Note 1 for a summary of recent accounting pronouncements that may impact future financial statements - A summary of recent accounting pronouncements impacting future financial statements is provided in Note 1 to the financial statements[142](index=142&type=chunk) [Item 3. Quantitative and Qualitative Disclosure about Market Risk](index=39&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosure%20about%20Market%20Risk) The company is exposed to market risks from currency exchange and interest rates, with no material changes since December 31, 2018 - LeMaitre Vascular is exposed to market risks from changes in currency exchange rates and interest rates[143](index=143&type=chunk) - These market risks are managed through regular operating and financing activities; the company has not used derivative financial instruments in 2019 or recent years[143](index=143&type=chunk) - There have been no material changes in quantitative and qualitative market risks since the disclosure in the Annual Report on Form 10-K for the year ended December 31, 2018[143](index=143&type=chunk) [Item 4. Controls and Procedures](index=39&type=section&id=Item%204.%20Controls%20and%20Procedures) Management evaluated the company's disclosure controls and procedures, concluding they were effective as of June 30, 2019, with no material changes in internal control [Evaluation of Disclosure Controls and Procedures](index=39&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) The CEO and CFO concluded that the company's disclosure controls and procedures were effective at reasonable assurance levels as of June 30, 2019 - As of June 30, 2019, the CEO and CFO concluded that the company's disclosure controls and procedures were effective at reasonable assurance levels[145](index=145&type=chunk) [Changes in Internal Control](index=39&type=section&id=Changes%20in%20Internal%20Control) There have been no material changes in the company's internal control over financial reporting during the six months ended June 30, 2019 - No material changes in internal control over financial reporting occurred during the six months ended June 30, 2019[146](index=146&type=chunk) [Inherent Limitations of Internal Controls](index=39&type=section&id=Inherent%20Limitations%20of%20Internal%20Controls) Management acknowledges that internal control systems provide only reasonable, not absolute, assurance due to inherent limitations like faulty judgments or circumvention - Management acknowledges that control systems provide only reasonable, not absolute, assurance, due to inherent limitations like faulty judgments, simple errors, circumvention, or management override[147](index=147&type=chunk) [Part II. Other Information](index=40&type=section&id=Part%20II.%20Other%20Information) This section covers legal proceedings, risk factors, equity security sales, exhibits, and official signatures [Item 1. Legal Proceedings](index=40&type=section&id=Item%201.%20Legal%20Proceedings) As of July 31, 2019, no legal proceedings are expected to have a material adverse effect on the company's financial position or results - As of July 31, 2019, no legal proceedings are expected to have a material adverse effect on the company's financial position, results of operations, or cash flows[150](index=150&type=chunk) [Item 1A. Risk Factors](index=40&type=section&id=Item%201A.%20Risk%20Factors) This section refers readers to the risk factors discussed in the company's Annual Report on Form 10-K, noting no substantive changes - There have been no substantive changes to the risk factors previously disclosed in the Annual Report on Form 10-K for the year ended December 31, 2018[151](index=151&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=40&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section states that there were no unregistered sales of equity securities or issuer purchases of equity securities during the period [Recent Sales of Unregistered Securities](index=40&type=section&id=Recent%20Sales%20of%20Unregistered%20Securities) No unregistered sales of equity securities occurred during the period - There were no recent sales of unregistered securities[152](index=152&type=chunk) [Issuer Purchases of Equity Securities](index=40&type=section&id=Issuer%20Purchases%20of%20Equity%20Securities) The issuer made no purchases of equity securities during the period - There were no issuer purchases of equity securities[153](index=153&type=chunk) [Item 6. Exhibits](index=41&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including certifications from the CEO and CFO, and XBRL instance documents - Exhibits include certifications from the Chief Executive Officer and Chief Financial Officer (31.1, 31.2, 32.1, 32.2) and various XBRL documents (101.INS, 101.SCH, 101.CAL, 101.DEF, 101.LAB, 101.PRE)[155](index=155&type=chunk) [Signatures](index=42&type=section&id=Signatures) The report was duly signed on behalf of LeMaitre Vascular, Inc. by its Chairman and CEO, and CFO and Director, on August 6, 2019 - The report was signed by George W. LeMaitre, Chairman and CEO, and Joseph P. Pellegrino, Jr., CFO and Director, on August 6, 2019[159](index=159&type=chunk)

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2019 Or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to . Commission File Number 001-33092 LEMAITRE VASCULAR, INC. (Exact name of registrant as specified in its charter) Delaware 04-2825458 (St ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) ☑ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2018 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to . Commission File Number 001-33092 LEMAITRE VASCULAR, INC. (Exact name of registrant as specified in its charter) Delaware 04-2825458 (State o ...