LeMaitre Vascular(LMAT) - 2022 Q3 - Quarterly Report

Part I. Financial Information This section provides the company's unaudited financial statements and management's analysis of financial condition and results of operations for the period Item 1. Financial Statements This section presents the unaudited consolidated financial statements of LeMaitre Vascular, Inc. for the period ended September 30, 2022, including balance sheets, statements of operations, comprehensive income, stockholders' equity, and cash flows, along with detailed notes explaining accounting policies, significant transactions, and financial position Consolidated Balance Sheets This statement provides a snapshot of the company's assets, liabilities, and stockholders' equity at specific points in time | Metric | Sep 30, 2022 (in thousands) | Dec 31, 2021 (in thousands) | | :-------------------------------- | :-------------------------- | :-------------------------- | | Assets | | | | Cash and cash equivalents | $16,913 | $13,855 | | Short-term marketable securities | $62,826 | $56,104 | | Total current assets | $153,142 | $139,883 | | Total assets | $302,048 | $292,802 | | Liabilities & Stockholders' Equity | | | | Total current liabilities | $23,439 | $21,813 | | Total liabilities | $40,801 | $38,651 | | Total stockholders' equity | $261,247 | $254,151 | - Total assets increased by $9.2 million from December 31, 2021, to September 30, 2022, primarily driven by increases in current assets like cash and cash equivalents and short-term marketable securities[12] Unaudited Consolidated Statements of Operations This statement details the company's revenues, expenses, and net income over specific reporting periods | Metric | 3 Months Ended Sep 30, 2022 (in thousands) | 3 Months Ended Sep 30, 2021 (in thousands) | 9 Months Ended Sep 30, 2022 (in thousands) | 9 Months Ended Sep 30, 2021 (in thousands) | | :--------------------------- | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | | Net sales | $39,028 | $38,368 | $120,697 | $114,921 | | Gross profit | $25,070 | $24,866 | $78,842 | $75,426 | | Income from operations | $6,150 | $9,073 | $19,862 | $28,124 | | Net income | $5,456 | $6,504 | $15,009 | $20,732 | | Basic EPS | $0.25 | $0.30 | $0.68 | $0.99 | | Diluted EPS | $0.25 | $0.30 | $0.68 | $0.98 | | Cash dividends declared per common share | $0.125 | $0.110 | $0.375 | $0.330 | - Net sales increased by 2% for the three months and 5% for the nine months ended September 30, 2022, compared to the prior year periods, while net income decreased by 16% for the three months and 28% for the nine months, primarily due to higher operating expenses and restructuring charges[14] Unaudited Consolidated Statements of Comprehensive Income This statement presents net income and other comprehensive income items, reflecting changes in equity from non-owner sources | Metric | 3 Months Ended Sep 30, 2022 (in thousands) | 3 Months Ended Sep 30, 2021 (in thousands) | 9 Months Ended Sep 30, 2022 (in thousands) | 9 Months Ended Sep 30, 2021 (in thousands) | | :------------------------------------ | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | | Net income | $5,456 | $6,504 | $15,009 | $20,732 | | Foreign currency translation adjustment, net | $(1,350) | $(335) | $(2,876) | $(1,052) | | Unrealized gain (loss) on short-term marketable securities | $(333) | $(58) | $(1,816) | $(59) | | Total other comprehensive income (loss) | $(1,683) | $(393) | $(4,692) | $(1,111) | | Comprehensive income | $3,773 | $6,111 | $10,317 | $19,621 | - Comprehensive income significantly decreased for both the three-month and nine-month periods ended September 30, 2022, primarily due to larger foreign currency translation adjustments and unrealized losses on short-term marketable securities[17] Unaudited Consolidated Statements of Stockholders' Equity This statement details changes in the company's equity accounts, including retained earnings and accumulated other comprehensive loss | Metric | Dec 31, 2021 (in thousands) | Sep 30, 2022 (in thousands) | | :-------------------------- | :-------------------------- | :-------------------------- | | Total Stockholders' Equity | $254,151 | $261,247 | | Retained Earnings | $88,125 | $94,896 | | Accumulated Other Comprehensive Loss | $(3,435) | $(8,127) | | Common Stock Shares Outstanding | 23,477,784 | 23,558,954 | - Stockholders' equity increased by $7.1 million from December 31, 2021, to September 30, 2022, driven by net income and stock-based compensation, partially offset by common stock dividends paid and an increase in accumulated other comprehensive loss[20][24] Unaudited Consolidated Statements of Cash Flows This statement summarizes the cash inflows and outflows from operating, investing, and financing activities | Cash Flow Activity | 9 Months Ended Sep 30, 2022 (in thousands) | 9 Months Ended Sep 30, 2021 (in thousands) | | :-------------------------------- | :--------------------------------------- | :--------------------------------------- | | Net cash provided by operating activities | $21,301 | $30,046 | | Net cash used in investing activities | $(9,969) | $(53,830) | | Net cash provided by (used in) financing activities | $(7,112) | $14,861 | | Net increase (decrease) in cash and cash equivalents | $3,058 | $(9,395) | | Cash and cash equivalents at end of period | $16,913 | $17,369 | - Net cash provided by operating activities decreased by $8.7 million for the nine months ended September 30, 2022, compared to the prior year, primarily due to lower net income and increased working capital usage[26] - Investing activities used significantly less cash in 2022 due to reduced purchases of marketable securities[26] Notes to Unaudited Consolidated Financial Statements This section provides detailed explanations and disclosures supporting the consolidated financial statements 1. Organization and Basis for Presentation This note describes the company's business, operational segment, and the basis for preparing the financial statements - LeMaitre Vascular, Inc. develops, manufactures, and markets medical devices and implants for vascular surgery, operating as a single segment[28][32] - Revenues are primarily from direct sales to hospitals and cryopreservation of human tissues[28][32] Net Sales by Geographic Area (in thousands) | Geographic Area | 3 Months Ended Sep 30, 2022 | 3 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2021 | | :------------------------ | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Americas | $26,627 | $25,299 | $82,024 | $76,327 | | Europe, Middle East and Africa | $9,922 | $10,535 | $31,165 | $31,200 | | Asia Pacific | $2,479 | $2,534 | $7,508 | $7,394 | | Total | $39,028 | $38,368 | $120,697 | $114,921 | 2. Income Tax Expense This note details the company's income tax expense, effective tax rates, and unrecognized tax benefits - The effective income tax rate for the three and nine months ended September 30, 2022, was 11.3% and 23.8%, respectively, with the three-month rate impacted by tax benefits from the St. Etienne, France factory closure[44][47] - The company maintains a valuation allowance of $1.6 million for deferred tax assets not expected to be realized[44][47] Unrecognized Tax Benefits (in thousands) | Metric | 9 Months Ended Sep 30, 2022 | | :------------------------------------------ | :-------------------------- | | Unrecognized tax benefits as of Dec 31, 2021 | $768 | | Reductions for prior years' tax positions | $(95) | | Reductions for lapses of statutes of limitations | $(94) | | Unrecognized tax benefits as of Sep 30, 2022 | $579 | 3. Inventories and Other Deferred Costs This note provides a breakdown of inventory components and other deferred costs Inventories and Other Deferred Costs (in thousands) | Category | Sep 30, 2022 | Dec 31, 2021 | | :-------------------------- | :----------- | :----------- | | Raw materials and subassemblies | $13,425 | $5,945 | | Work-in-process | $3,600 | $9,416 | | Finished products | $25,409 | $25,286 | | Other deferred costs | $5,277 | $5,457 | | Total inventory and other deferred costs | $47,711 | $46,104 | - Total inventory and other deferred costs increased by $1.6 million from December 31, 2021, to September 30, 2022, primarily due to a significant increase in raw materials and subassemblies[46] 4. Acquisitions This note outlines the company's accounting for acquisitions, including goodwill and contingent consideration - Acquisitions are accounted for using the acquisition method, with goodwill arising from expected synergies[48][49][52] - The Artegraft biologic graft business acquisition in 2020 included potential earn-out payments of up to $17.5 million based on unit sales targets through 2023[48][49][52] Artegraft Acquisition Purchase Price Allocation (in thousands) | Category | Allocated Fair Value | | :-------------------- | :------------------- | | Inventory | $3,859 | | Accounts receivable | $1,789 | | Equipment and supplies | $1,140 | | Intangible assets | $39,056 | | Goodwill | $27,115 | | Purchase price | $72,906 | 5. Divestitures This note details the company's divestiture activities, including the closure of its St. Etienne, France factory - On April 26, 2022, the company committed to closing its St. Etienne, France factory (Cardial business) to streamline manufacturing, with operations ceasing on June 30, 2022, resulting in a $3.1 million restructuring charge for employment termination, asset impairment, and third-party costs[58][59] - The St. Etienne factory building, improvements, and land were classified as held for sale and subsequently sold on October 10, 2022, for $0.9 million, yielding a gain of approximately $0.1 million[60] 6. Goodwill and Other Intangible Assets This note provides information on the company's goodwill and other intangible assets, including amortization - Goodwill remained unchanged during the nine months ended September 30, 2022, while other intangible assets decreased from $52.7 million at December 31, 2021, to $48.1 million at September 30, 2022, due to amortization[62] Amortization Expense (in thousands) | Period | 3 Months Ended Sep 30, 2022 | 3 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2021 | | :------------------ | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Amortization expense | $1,535 | $1,547 | $4,647 | $4,675 | 7. Revolving Line of Credit and Long-term Debt This note details the company's debt arrangements, including its revolving line of credit and term loan - The company incurred $65.0 million in debt in June 2020 for the Artegraft acquisition, including a $25.0 million revolving credit line and a $40.0 million five-year term loan[64][67] - The term loan was repaid in full during the nine months ended September 30, 2021, and the entire credit agreement was terminated in November 2021[64][67] 8. Leases This note describes the company's lease arrangements for operational facilities and related costs - The company leases most of its operational facilities, primarily accounted for as operating leases, including key facilities in Burlington, Massachusetts (expiring Dec 2030) and Sulzbach, Germany (extended through June 2031)[69][70][72] - New leases were signed in Seoul, Korea, and existing leases extended in Arizona and China during 2022[69][70][72] Lease Cost and Cash Paid for Operating Lease Liabilities (in thousands) | Metric | 3 Months Ended Sep 30, 2022 | 3 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2021 | | :---------------------------------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Total lease cost | $946 | $711 | $2,433 | $1,995 | | Cash paid for operating lease liabilities | $977 | $725 | $2,461 | $2,106 | Minimum Non-cancelable Operating Lease Rental Commitments (in thousands) | Period | Amount | | :-------------------------- | :------- | | Remainder of 2022 | $714 | | Year ending Dec 31, 2023 | $2,683 | | Year ending Dec 31, 2024 | $2,600 | | Year ending Dec 31, 2025 | $2,520 | | Year ending Dec 31, 2026 | $2,471 | | Year ending Dec 31, 2027 | $2,388 | | Thereafter | $6,889 | | Adjustment to net present value | $(3,540) | | Minimum noncancelable lease liability | $16,725 | 9. Accrued Expenses and Other Long-term Liabilities This note provides a breakdown of current accrued expenses and other long-term liabilities Accrued Expenses (in thousands) | Category | Sep 30, 2022 | Dec 31, 2021 | | :----------------------- | :----------- | :----------- | | Compensation and related taxes | $10,228 | $10,236 | | Accrued expenses | $3,400 | $2,719 | | Accrued purchases | $3,202 | $2,545 | | Total | $17,400 | $16,332 | Other Long-term Liabilities (in thousands) | Category | Sep 30, 2022 | Dec 31, 2021 | | :-------------------------- | :----------- | :----------- | | Acquisition-related liabilities | $1,609 | $1,761 | | Income taxes | $646 | $799 | | Total | $2,405 | $2,701 | 10. Segment and Enterprise-Wide Disclosures This note provides information on the company's single operating segment and geographic revenue distribution - The company operates as a single operating segment, with most revenues generated in the United States, Germany, and other European countries, Canada, the United Kingdom, and Japan[79][80] - Substantially all assets are located in the United States and Germany[79][80] Net Sales by Country (in thousands) | Country | 3 Months Ended Sep 30, 2022 | 3 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2021 | | :-------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | United States | $24,242 | $23,313 | $74,734 | $70,453 | | Germany | $2,814 | $3,369 | $8,675 | $9,586 | | Canada | $1,962 | $1,672 | $6,141 | $5,052 | | United Kingdom | $1,269 | $1,204 | $4,150 | $3,497 | | Other countries | $8,741 | $8,810 | $26,997 | $26,333 | | Net Sales | $39,028 | $38,368 | $120,697 | $114,921 | 11. Share-based Compensation This note details the company's share-based compensation plans and related expenses Total Share-based Compensation (in thousands) | Category | 3 Months Ended Sep 30, 2022 | 3 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2021 | | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Stock option awards | $614 | $504 | $1,840 | $1,660 | | Restricted stock units | $432 | $293 | $1,231 | $933 | | Performance-based restricted stock units | $140 | $- | $418 | $- | | Total share-based compensation | $1,186 | $797 | $3,489 | $2,593 | - Total share-based compensation increased by 49% for the three months and 35% for the nine months ended September 30, 2022, compared to the prior year, driven by increases across all award types, including new performance-based restricted stock units[81] 12. Net Income per Share This note provides details on the calculation of basic and diluted net income per share Earnings Per Share (EPS) | Metric | 3 Months Ended Sep 30, 2022 | 3 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2021 | | :------------------------------------ | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Basic EPS | $0.25 | $0.30 | $0.68 | $0.99 | | Diluted EPS | $0.25 | $0.30 | $0.68 | $0.98 | | Weighted average shares outstanding (Basic) | 21,984 | 21,592 | 21,959 | 20,920 | | Weighted average shares outstanding (Diluted) | 22,217 | 21,935 | 22,149 | 21,251 | - Both basic and diluted EPS decreased for the three-month and nine-month periods ended September 30, 2022, reflecting the decline in net income despite a slight increase in weighted-average shares outstanding[83] 13. Stockholders' Equity This note provides further details on changes in stockholders' equity, including share repurchase programs and dividends - The Board of Directors authorized a $20.0 million common stock repurchase program on February 22, 2022, valid until February 22, 2023, though no repurchases have been made under this program to date[84] Cash Dividends Declared (in thousands) | Fiscal Year | Record Date | Payment Date | Per Share Amount | Dividend Payment | | :---------- | :---------- | :----------- | :--------------- | :--------------- | | 2022 | March 8, 2022 | March 24, 2022 | $0.125 | $2,743 | | 2022 | May 17, 2022 | June 2, 2022 | $0.125 | $2,745 | | 2022 | August 25, 2022 | September 8, 2022 | $0.125 | $2,750 | | 2021 | March 9, 2021 | March 25, 2021 | $0.110 | $2,262 | | 2021 | May 19, 2021 | June 3, 2021 | $0.110 | $2,267 | | 2021 | August 26, 2021 | September 9, 2021 | $0.110 | $2,401 | | 2021 | November 19, 2021 | December 2, 2021 | $0.110 | $2,405 | 14. Supplemental Cash Flow Information This note provides additional details on cash flow items not presented on the face of the cash flow statement Cash Paid for Income Taxes (in thousands) | Metric | 9 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2021 | | :------------------------ | :-------------------------- | :-------------------------- | | Cash paid for income taxes, net | $6,822 | $7,485 | 15. Fair Value Measurements This note describes the company's fair value measurements for financial instruments, particularly acquisition-related liabilities - 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)[90][92] - The company's acquisition-related contingent liabilities are measured using Level 3 techniques, reflecting management's estimates of future revenues and likelihood of achieving targets[90][92] Rollforward of Fair Value of Level 3 Liabilities (in thousands) | Metric | 9 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2021 | | :-------------------------------- | :-------------------------- | :-------------------------- | | Beginning balance | $1,492 | $2,240 | | Change in fair value included in earnings | $41 | $(508) | | Ending balance | $1,533 | $1,732 | 16. Accumulated Other Comprehensive Loss This note provides a rollforward of accumulated other comprehensive loss, detailing its components Accumulated Other Comprehensive Loss (in thousands) | Metric | 9 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2021 | | :------------------------------------------ | :-------------------------- | :-------------------------- | | Beginning balance | $(3,435) | $(1,525) | | Other comprehensive income (loss) before reclassifications | $(4,692) | $(1,111) | | Ending Balance | $(8,127) | $(2,636) | - Accumulated other comprehensive loss significantly increased from $(3.4) million at the beginning of 2022 to $(8.1) million by September 30, 2022, primarily due to foreign currency translation adjustments and unrealized losses on short-term marketable securities[93] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the company's financial condition and results of operations, highlighting key trends, strategies, and factors impacting performance, including the effects of the COVID-19 pandemic, foreign exchange rates, and operational initiatives Overview This overview introduces LeMaitre Vascular's business, market, strategic focus, and the impact of external factors like the COVID-19 pandemic - LeMaitre Vascular is a global provider of medical devices and human tissue cryopreservation services for peripheral vascular disease, with an estimated worldwide market for its products of $750 million[97] - The company's strategy focuses on a direct sales force, niche products, and acquisitions[97] - The COVID-19 pandemic has led to variable and unpredictable sales due to limitations on elective procedures and restricted hospital access for sales representatives[99][101] - Biologic device offerings, representing 50% of Q3 2022 worldwide sales, are viewed favorably[99][101] - Key business opportunities include: adding complementary products through acquisitions, growing the direct sales force, introducing products into new territories, increasing average selling prices, consolidating and automating manufacturing, and updating/introducing new products through R&D[105] Net Sales and Expense Components This section defines the components of net sales and operating expenses, and discusses the impact of foreign currency fluctuations - Net sales are derived from product and service sales, less discounts and returns, primarily through a direct sales force to hospitals[114][115][116][117][118] - Cost of sales includes manufacturing personnel, raw materials, depreciation, and overhead[114][115][116][117][118] - Operating expenses are categorized into sales and marketing, general and administrative, and research and development[114][115][116][117][118] - Foreign currency fluctuations, particularly with the Euro, significantly impact financial results, with a stronger U.S. dollar decreasing reported sales by approximately $4.4 million for the nine months ended September 30, 2022[113] Results of Operations This section analyzes the company's financial performance, including net sales, gross profit, and operating expenses by period and geography Net Sales by Geography (in thousands) | Geography | 3 Months Ended Sep 30, 2022 | 3 Months Ended Sep 30, 2021 | % Change (3M) | 9 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2021 | % Change (9M) | | :------------------------ | :-------------------------- | :-------------------------- | :------------ | :-------------------------- | :-------------------------- | :------------ | | Americas | $26,627 | $25,299 | 5% | $82,024 | $76,327 | 7% | | Europe, Middle East and Africa | $9,922 | $10,535 | (6%) | $31,165 | $31,200 | (0%) | | Asia Pacific | $2,479 | $2,534 | (2%) | $7,508 | $7,394 | 2% | | Total Net Sales | $39,028 | $38,368 | 2% | $120,697 | $114,921 | 5% | - Overall net sales increased by 2% for the three months and 5% for the nine months ended September 30, 2022[123][124][127][128][129][130][131][132] - Americas sales grew by 5% (3M) and 7% (9M), driven by bovine grafts, shunts, and allograft services[123][124][127][128][129][130][131][132] - EMEA sales decreased by 6% (3M) and remained flat (9M) due to decreased valvulotomes and ovine grafts, partially offset by shunts and carotid patches[123][124][127][128][129][130][131][132] - Asia Pacific sales decreased by 2% (3M) but increased by 2% (9M)[123][124][127][128][129][130][131][132] Gross Profit and Margin | Metric | 3 Months Ended Sep 30, 2022 | 3 Months Ended Sep 30, 2021 | % Change (3M) | 9 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2021 | % Change (9M) | | :---------- | :-------------------------- | :-------------------------- | :------------ | :-------------------------- | :-------------------------- | :------------ | | Gross profit | $25,070 | $24,866 | 1% | $78,842 | $75,426 | 5% | | Gross margin | 64.2% | 64.8% | (0.6%) | 65.3% | 65.6% | (0.3%) | - Gross profit increased by 1% (3M) and 5% (9M), but gross margin decreased by 60 basis points (3M) and 30 basis points (9M)[133][134] - This decline was attributed to higher labor costs, unfavorable product mix (e.g., higher low-margin embolectomy catheters), unfavorable foreign currency exchange rates, and manufacturing inefficiencies including higher inventory write-offs[133][134] Operating Expenses (in thousands) | Expense Category | 3 Months Ended Sep 30, 2022 | 3 Months Ended Sep 30, 2021 | % Change (3M) | 9 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2021 | % Change (9M) | | :------------------------ | :-------------------------- | :-------------------------- | :------------ | :-------------------------- | :-------------------------- | :------------ | | Sales and marketing | $8,229 | $6,941 | 19% | $24,321 | $20,210 | 20% | | General and administrative | $7,229 | $6,004 | 20% | $21,812 | $18,748 | 16% | | Research and development | $3,462 | $2,848 | 22% | $9,740 | $8,344 | 17% | | Restructuring | $- | $- | * | $3,107 | $- | * | - Total operating expenses increased significantly by 20% (3M) and 25% (9M)[136][137][138][139][140][142][143] - Sales and marketing expenses rose due to increased sales representatives and higher commissions[136][137][138][139][140][142][143] - General and administrative expenses increased due to higher salaries and personnel[136][137][138][139][140][142][143] - R&D expenses grew due to increased personnel and outside services for European regulatory approvals (MDR)[136][137][138][139][140][142][143] - A $3.1 million restructuring charge was recorded for the St. Etienne, France factory closure[136][137][138][139][140][142][143] Liquidity and Capital Resources This section discusses the company's cash position, investments, and cash flow activities, and its ability to meet future liquidity needs Cash and Cash Equivalents (in thousands) | Metric | Sep 30, 2022 | Dec 31, 2021 | | :------------------------ | :----------- | :----------- | | Cash and cash equivalents | $16,913 | $13,855 | | Short-term marketable securities | $62,826 | $56,104 | - Cash and cash equivalents increased to $16.9 million at September 30, 2022, from $13.9 million at December 31, 2021[149] - Short-term marketable securities also increased, but reflected an unrealized loss of $2.1 million due to rising interest rates[149] - In February 2022, the Board authorized a $20.0 million common stock repurchase program, but no repurchases have been made to date[152][156] - The company expects existing cash, cash equivalents, and investments to be sufficient for anticipated cash requirements for at least the next twelve months[152][156] Cash Flows Summary (in thousands) | Cash Flow Activity | 9 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2021 | Net Change | | :-------------------------------- | :-------------------------- | :-------------------------- | :--------- | | Operating activities | $21,301 | $30,046 | $(8,745) | | Investing activities | $(9,969) | $(53,830) | $43,861 | | Financing activities | $(7,112) | $14,861 | $(21,973) | - Net cash from operating activities decreased due to lower net income and increased working capital usage[158][160][161][163] - Net cash used in investing activities significantly decreased due to lower purchases of marketable securities[158][160][161][163] - Net cash used in financing activities was $7.1 million, primarily for dividend payments and deferred acquisition payments, contrasting with a net cash inflow in the prior year from an equity offering[158][160][161][163] Critical Accounting Policies and Estimates This section discusses the accounting policies and estimates that require significant judgment and could materially impact financial results - There have been no material changes in critical accounting policies during the nine months ended September 30, 2022[164] - Key estimates and assumptions relate to revenue recognition, inventory valuation, intangible assets and goodwill, contingent consideration, and income taxes[164] Recent Accounting Pronouncements This section outlines recently issued accounting standards and their expected impact on the company's financial statements - The company believes that recently issued accounting standards not yet effective will not have a material impact on its financial position or results of operations upon adoption[41][165] Item 3. Quantitative and Qualitative Disclosure about Market Risk This section discusses the company's exposure to market risks, primarily from changes in currency exchange rates and interest rates, and how these risks are managed - The company is exposed to market risks from currency exchange rates and interest rates, managed through regular operating and financing activities, with no derivative financial instruments used in 2022 or recent years[166] - No material changes in market risks have occurred since December 31, 2021[166] Item 4. Controls and Procedures This section confirms the effectiveness of the company's disclosure controls and procedures as of September 30, 2022, and states that there have been no material changes in internal control over financial reporting during the period - As of September 30, 2022, the Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective at reasonable assurance levels[168] - There have been no material changes in internal control over financial reporting for the nine months ended September 30, 2022[169] - Management acknowledges the inherent limitations of internal controls, noting that no system can prevent all error and fraud, and that controls can be circumvented or become inadequate over time[170] Part II. Other Information This section covers legal proceedings, risk factors, equity sales, and exhibits, providing additional context beyond the financial statements Item 1. Legal Proceedings This section states that the company is involved in various legal matters in the ordinary course of business, but management does not believe any current proceedings will have a material adverse effect on its financial position, results of operations, or cash flows - As of November 8, 2022, there are no legal proceedings that management believes would have a material adverse effect on the company's financial position, results of operations, or cash flows[173] Item 1A. Risk Factors This section supplements the risk factors from the Annual Report on Form 10-K, focusing on international regulatory compliance, particularly the challenges and potential impacts of obtaining and maintaining CE marks under the new EU Medical Device Regulation (MDR) and UKCA marks in the United Kingdom - Failure to comply with international regulatory requirements, including obtaining and maintaining CE marks under the EU MDR and UKCA marks, could harm the business by impacting product sales and requiring significant time and expense[175][177][181][182] - The transition to MDR requires new CE marks for all products, with higher clinical evidence for Class III and implantable devices[177][178] - Delays in obtaining MDR CE marks could lead to backorders, as seen with CardioCel and VascuCel, and impact sales and gross margins[177][178] - Specific product challenges include the XenoSure MDD CE mark limiting indications and requiring more expensive tissue suppliers, negatively impacting EMEA gross margin[178][180] - A significant change in latex formulation for the Pruitt F3 shunt requires an MDR CE mark, potentially leading to backorders by Q4 2022[178][180] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section reports no unregistered sales of equity securities and details limited issuer purchases of common stock solely for satisfying employee tax obligations related to restricted stock unit vesting - No unregistered sales of equity securities occurred during the period[186] Issuer Purchases of Equity Securities | Period | Total Number of Shares Purchased | Average Price Paid Per Share | | :-------------------------------- | :----------------------------- | :--------------------------- | | July 1, 2022 through July 31, 2022 | - | $- | | August 1, 2022 through August 31, 2022 | 55 | $53.24 | | September 1, 2022 through September 30, 2022 | - | $- | | Total | 55 | $53.24 | - The 55 shares repurchased were to satisfy employees' minimum statutory withholding taxes in connection with the vesting of restricted stock units[187] Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including certifications from the CEO and CFO, and various Inline XBRL documents - Exhibit 31.1: Certification of Chief Executive Officer - Exhibit 31.2: Certification of Chief Financial Officer - Exhibit 32.1: Certification by the Chief Executive Officer (18 U.S.C. §1350) - Exhibit 32.2: Certification by the Chief Financial Officer (18 U.S.C. §1350) - Exhibits 101.INS, 101.SCH, 101.CAL, 101.DEF, 101.LAB, 101.PRE: Inline XBRL documents - Exhibit 104: Cover Page Interactive Data File[189] Signatures This section contains the required signatures of the registrant's authorized officers, confirming the submission of the Form 10-Q - The report is duly signed on behalf of LeMaitre Vascular, Inc. by George W. LeMaitre, Chairman and Chief Executive Officer, and Joseph P. Pellegrino, Jr., Chief Financial Officer and Director, on November 8, 2022[193][194]