10-Q

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 June 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
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

63 Second Avenue, Burlington, Massachusetts	01803
(Address of principal executive offices)	(Zip Code)

	(781) 221-2266
(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒    No  ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ☒    No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth Company “in Rule12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☒
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule12b-2 of the Exchange Act).    Yes  ☐    No  ☒

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

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common	LMAT	The Nasdaq Global Market

The registrant had 19,846,966 shares of common stock, $.01 par value per share, outstanding as of July 31, 2019.

LEMAITRE VASCULAR

FORM 10-Q

TABLE OF CONTENTS

			Page
Part I.	Financial Information:
	Item 1.	Financial Statements
		Consolidated Balance Sheets as of June 30, 2019 (unaudited) and December 31, 2018	3
		Unaudited Consolidated Statements of Operations for the three-month and six-month periods ended June 30, 2019 and 2018	4
		Unaudited Consolidated Statements of Comprehensive Income for the three-month and six-month periods ended June 30, 2019 and 2018	5
		Unaudited Consolidated Statements of Stockholders’ Equity for the three-month and six-month periods ended June 30, 2019 and 2018	6
		Unaudited Consolidated Statements of Cash Flows for the six-month periods ended June 30, 2019 and 2018	7
		Notes to Unaudited Consolidated Financial Statements	8
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	22
	Item 3.	Quantitative and Qualitative Disclosure about Market Risk	31
	Item 4.	Controls and Procedures	31
Part II.	Other Information:
	Item 1.	Legal Proceedings	32
	Item 1A.	Risk Factors	32
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	32
	Item 6.	Exhibits	33
	Signatures		34

2

Part I. Financial Information

Item 1. Financial Statements

LeMaitre Vascular, Inc.

 Consolidated Balance Sheets

	(unaudited)
	June 30,			December 31,
	2019			2018
	(in thousands, except share data)
Assets
Current assets:
Cash and cash equivalents	$	13,264		$	26,318
Short-term marketable securities		34,979			21,668
Accounts receivable, net of allowances of $460 at June 30, 2019 and $399 at December 31, 2018		15,548			15,721
Inventory and other deferred costs		32,243			27,388
Prepaid expenses and other current assets		2,125			2,922
Total current assets		98,159			94,017
Property and equipment, net		14,163			14,102
Right-of-use leased assets		6,428			-
Goodwill		29,860			29,868
Other intangibles, net		12,632			13,692
Deferred tax assets		1,209			1,215
Other assets		210			194
Total assets	$	162,661		$	153,088
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	1,427		$	1,732
Accrued expenses		12,097			15,847
Acquisition-related obligations		2,200			2,179
Lease liabilities - short-term		1,698			-
Total current liabilities		17,422			19,758
Lease liabilities - long-term		5,152			-
Deferred tax liabilities		484			484
Other long-term liabilities		2,066			2,611
Total liabilities		25,124			22,853
Stockholders’ equity:
Preferred stock, $0.01 par value; authorized 3,000,000 shares; none outstanding		-			-
Common stock, $0.01 par value; authorized 37,000,000 shares; issued 21,250,872 shares at June 30, 2019, and 21,110,224 shares at December 31, 2018		213			211
Additional paid-in capital		100,890			98,442
Retained earnings		50,624			45,831
Accumulated other comprehensive loss		(3,818	)		(3,900	)
Treasury stock, at cost; 1, 502,519 shares at June 30, 2019 and 1,501,511 shares at December 31, 2018		(10,372	)		(10,349	)
Total stockholders’ equity		137,537			130,235
Total liabilities and stockholders’ equity	$	162,661		$	153,088

See accompanying notes to consolidated financial statements.

3

LeMaitre Vascular, Inc.

Consolidated Statements of Operations

(unaudited)

	Three months ended						Six months ended
	June 30,						June 30,
	2019			2018			2019			2018
	(in thousands, except per share data)						(in thousands, except per share data)
Net sales	$	29,483		$	27,020		$	57,962		$	53,014
Cost of sales		9,168			8,028			18,183			15,548
Gross profit		20,315			18,992			39,779			37,466
Sales and marketing		7,613			6,792			15,458			13,882
General and administrative		4,531			4,547			9,475			9,244
Research and development		2,256			1,988			4,496			3,813
Gain on divestiture		-			(5,876	)		-			(5,876	)
Total operating expenses		14,400			7,451			29,429			21,063
Income from operations		5,915			11,541			10,350			16,403
Other income (expense):
Interest income		224			165			381			260
Foreign currency gain (loss)		(51	)		(159	)		(130	)		(200	)
Income before income taxes		6,088			11,547			10,601			16,463
Provision for income taxes		1,464			2,796			2,464			3,859
Net income	$	4,624		$	8,751		$	8,137		$	12,604
Earnings per share of common stock:
Basic	$	0.23		$	0.45		$	0.41		$	0.65
Diluted	$	0.23		$	0.43		$	0.40		$	0.62
Weighted-average shares outstanding:
Basic		19,680			19,320			19,660			19,301
Diluted		20,246			20,260			20,226			20,243
Cash dividends declared per common share	$	0.085		$	0.070		$	0.170		$	0.140

See accompanying notes to consolidated financial statements.

4

LeMaitre Vascular, Inc.

Consolidated Statements of Comprehensive Income

(unaudited) 

	Three months ended					Six months ended
	June 30,					June 30,
	2019		2018			2019			2018
	(in thousands)					(in thousands)
Net income	$	4,624	$	8,751		$	8,137		$	12,604
Other comprehensive income (loss):
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

See accompanying notes to consolidated financial statements.

5

LeMaitre Vascular, Inc.

Consolidated Statements of Stockholders’ Equity

(unaudited) 

										Accumulated
					Additional					Other								Total
	Common Stock				Paid-in		Retained			Comprehensive			Treasury Stock					Stockholders’
	Shares		Amount		Capital		Earnings			Income (Loss)			Shares		Amount			Equity
Balance at December 31, 2018		21,110,224	$	211	$	98,442	$	45,831		$	(3,900	)		1,501,511	$	(10,349	)	$	130,235
Net income								3,513											3,513
Other comprehensive income											(192	)							(192	)
Issuance of common stock for stock options exercised		61,419		1		478													479
Vested restricted stock units		2,026		-		-													-
Stock-based compensation expense						746													746
Repurchase of common stock at cost														926		(21	)		(21	)
Common stock dividend accrued								(1,672	)										(1,672	)
Balance at March 31, 2019		21,173,669		212		99,666		47,672			(4,092	)		1,502,437		(10,370	)		133,088
Net income								4,624											4,624
Other comprehensive income											274								274
Issuance of common stock for stock options exercised		77,032		1		530													531
Vested restricted stock units		171		-		-													-
Stock-based compensation expense						694													694
Repurchase of common stock at cost														1,008		(2	)		(2	)
Common stock dividend paid								(1,672	)										(1,672	)
Balance at June 30, 2019		21,250,872		213		100,890		50,624			(3,818	)		1,503,445		(10,372	)		137,537

										Accumulated
					Additional					Other								Total
	Common Stock				Paid-in		Retained			Comprehensive			Treasury Stock					Stockholders’
	Shares		Amount		Capital		Earnings			Income (Loss)			Shares		Amount			Equity
Balance at December 31, 2017		20,745,041	$	207	$	93,127	$	28,333		$	(2,289	)		1,480,101	$	(9,608	)		109,770
Net income								3,853											3,853
Other comprehensive income											283								283
Issuance of common stock for stock options exercised		34,826		1		292													293
Stock-based compensation expense						621													621
Repurchase of common stock at cost																			-
Common stock dividend accrued								(1,350	)										(1,350	)
Balance at March 31, 2018		20,779,867	$	208	$	94,040	$	30,836		$	(2,006	)		1,480,101	$	(9,608	)	$	113,470
Net income								8,751											8,751
Other comprehensive income											(1,201	)							(1,201	)
Issuance of common stock for stock options exercised		56,215		-		446													446
Vested restricted stock units		765		-		-													-
Stock-based compensation expense						636													636
Repurchase of common stock at cost														149		(5	)		(5	)
Common stock dividend accrued								(1,353	)										(1,353	)
Balance at June 30, 2018		20,836,847	$	208	$	95,122	$	38,234		$	(3,207	)		1,480,250	$	(9,613	)	$	120,744

See accompanying notes to consolidated financial statements. 

6

LeMaitre Vascular, Inc.

Consolidated Statements of Cash Flows

(unaudited)

	For the six months ended
	June 30,
	2019			2018
	(in thousands)
Operating activities
Net income	$	8,137		$	12,604
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		2,630			2,102
Stock-based compensation		1,440			1,257
Fair value adjustment to contingent consideration obligations		79			42
Provision for doubtful accounts		219			146
Provision for inventory write-downs		402			170
Gain on divestitures		-			(5,876	)
Foreign currency transaction loss		(63	)		96
Changes in operating assets and liabilities:
Accounts receivable		(62	)		(552	)
Inventory and other deferred costs		(5,288	)		(1,306	)
Prepaid expenses and other assets		715			26
Accounts payable and other liabilities		(4,094	)		(82	)
Net cash provided by operating activities		4,115			8,627
Investing activities
Purchases of property and equipment and other assets		(1,651	)		(1,230	)
Purchases of short-term marketable securities		(13,175	)		(10,757	)
Proceeds from divestuture		-			7,400
Net cash used in investing activities		(14,826	)		(4,587	)
Financing activities
Payments of deferred acquisition consideration		(59	)		(1,142	)
Proceeds from issuance of common stock		1,008			738
Purchase of treasury stock		(23	)		(5	)
Common stock cash dividend paid		(3,344	)		(2,704	)
Net cash provided by financing activities		(2,418	)		(3,113	)
Effect of exchange rate changes on cash and cash equivalents		75			(385	)
Net increase in cash and cash equivalents		(13,054	)		542
Cash and cash equivalents at beginning of period		26,318			19,096
Cash and cash equivalents at end of period	$	13,264		$	19,638
Supplemental disclosures of cash flow information (see Note 12)

See accompanying notes to consolidated financial statements.

7

LeMaitre Vascular, Inc.

Notes to Consolidated Financial Statements

June 30, 2019

(unaudited)

1. Organization and Basis for Presentation

Description of Business

Unless the context requires otherwise, references to LeMaitre Vascular, we, our, and us refer to LeMaitre Vascular, Inc. and our subsidiaries. We develop, manufacture, and market medical devices and implants used primarily in the field of vascular surgery. We also derive revenues from the processing and cryopreservation of human tissues for implantation in patients. We operate in a single segment in which our principal product lines include the following: anastomotic clips, angioscopes, balloon catheters, biologic vascular grafts, biologic vascular patches, carotid shunts, polyester vascular grafts, powered phlebectomy devices, radiopaque marking tape, remote endarterectomy devices, surgical glue and valvulotomes. Our offices are located in Burlington, Massachusetts; Fox River Grove, Illinois; Chandler, Arizona; Vaughan, Canada; Sulzbach, Germany; Milan, Italy; Madrid, Spain; Saint-Etienne, France; North Melbourne, Australia; Tokyo, Japan; Shanghai, China and Singapore.

Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (GAAP) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments, consisting only of normal, recurring adjustments considered necessary for a fair presentation of the results of these interim periods have been included. Preparing financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. Actual results may differ from these estimates. Our estimates and assumptions, including those related to bad debts, inventories, intangible assets, sales returns and discounts, share-based compensation, and income taxes are updated as appropriate. The results for the six months ended June 30, 2019 are not necessarily indicative of results to be expected for the entire year. The information contained in these interim financial statements should be read in conjunction with our audited consolidated financial statements as of and for the year ended December 31, 2018, including the notes thereto, included in our Form 10-K filed with the Securities and Exchange Commission (SEC) on March 11, 2019.

Consolidation

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

Revenue Recognition

Our revenue is derived primarily from the sale of disposable or implantable devices used during vascular surgery. We sell primarily directly to hospitals and to a lesser extent to distributors, as described below, and, during the periods presented in our consolidated financial statements, entered into consigned inventory arrangements with either hospitals or distributors on a limited basis. With the acquisition of the RestoreFlow allograft business, we also derive revenues from the processing and cryopreservation of human tissues for implantation in patients. These revenues are recognized when services have been provided and the tissue has been shipped to the customer, provided all other revenue recognition criteria discussed in the succeeding paragraph have been met.

We recognize revenue under the provisions of ASU 2014-09, Revenue from Contracts with Customers (Topic 606). The core principle of Topic 606 is that an entity should recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The standard explains that to achieve the core principle, an entity should take the following actions:

Step 1: Identify the contract with a customer

Step 2: Identify the performance obligations in the contract

Step 3: Determine the transaction price

Step 4: Allocate the transaction price

Step 5: Recognize revenue when or as the entity satisfies a performance obligation

8

Revenue is recognized when or as a company satisfies a performance obligation by transferring a promised good or service to a customer (which is when the customer obtains control of that good or service). In instances in which shipping and handling activities are performed after a customer takes control of the goods (such as when title passes upon shipment from our dock), we have made the policy election allowed under Topic 606 to account for these activities as fulfillment costs and not as performance obligations.

We generally reference customer purchase orders to determine the existence of a contract. Orders that are not accompanied by a purchase order are confirmed with the customer either in writing or verbally. The purchase orders or similar correspondence, once accepted, identify the performance obligations as well as the transaction price, and otherwise outline the rights and obligations of each party. We allocate the transaction price of each contract among the performance obligations in accordance with the pricing of each item specified on the purchase order, which is in turn based on standalone selling prices per our published price lists. In cases where we discount products or provide certain items free of charge, we allocate the discount proportionately to all performance obligations, unless it can be demonstrated that the discount should be allocated entirely to one or more, but not all, of the performance obligations.

We recognize revenue, net of allowances for returns and discounts, fees paid to group purchasing organizations, and any sales and value added taxes required to be invoiced, which we have elected to exclude from the measurement of the transaction price as allowed by the standard, at the time of shipment (taking into consideration contractual shipping terms), or in the case of consigned inventory, when it is consumed. Shipment is the point at which control of the product and title passes to our customers, and at which LeMaitre Vascular has a present right to receive payment for the goods.

Below is a disaggregation of our revenue by major geographic area, which is among the primary categorizations used by management in evaluating financial performance, for the periods indicated (in thousands):  

	Three months ended June 30,				Six months ended June 30,
	2019		2018		2019		2018
	($ in thousands)				($ in thousands)
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

Except as discussed in Note 7, we do not carry any contract assets or contract liabilities, as there are generally no unbilled amounts due from customers under contracts for which we have partially satisfied performance obligations, or amounts received from customers for which we have not satisfied performance obligations. We satisfy our performance obligations under revenue contracts within a very short time period from receipt of the orders, and payments from customers are typically received within 30 to 60 days of fulfillment of the orders, except in certain geographies such as Spain and Italy where the payment cycle is customarily longer. Accordingly, there is no significant financing component to our revenue contracts. Additionally, we have elected as a policy that incremental costs (such as commissions) incurred to obtain contracts are expensed as incurred, due to the short-term nature of the contracts.

Customers returning products may be entitled to full or partial credit based on the condition and timing of the return. To be accepted, a returned product must be unopened (if sterile), unadulterated, and undamaged, must have at least 18 months remaining prior to its expiration date, or twelve months for our hospital customers in Europe, and generally be returned within 30 days of shipment. These return policies apply to sales to both hospitals and distributors. The amount of products returned to us, either for exchange or credit, has not been material. Nevertheless, we provide for an allowance for future sales returns based on historical return experience, which requires judgment. Our cost of replacing defective products has not been material and is accounted for at the time of replacement.

9

Recent Accounting Pronouncements

On January 1, 2019 we adopted the provisions of ASU No. 2016-02, Leases (Topic 842), subsequently amended by ASU 2018-11, Leases (Topic 842): Targeted Improvements. Under the new guidance, we are required to recognize the following for all leases (with the exception of short-term leases) at the commencement date: a lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis; and a right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. As allowed by the standard, we elected to use the transition option not to apply the new lease standard to comparative periods but instead to recognize a cumulative-effect adjustment to retained earnings as of the date of adoption, January 1, 2019. Upon adoption of this standard, we recognized lease liabilities of $7.0 million and right-of-use assets in the amount of $6.5 million (net of the reversal of a previously recorded deferred rent liability of $0.5 million). There was no cumulative-effect adjustment to retained earnings required. Additional disclosures required under the new standard are included in Note 6 to these financial statements.

In August 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (ASU) 2018-15, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40), which aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). The new standard is effective for us beginning January 1, 2020, with early adoption permitted. The adoption of this standard is not expected to have a material impact on our financial statements.

In August 2018, the FASB issued ASU 2018-13 Fair Value Measurement (Topic 820), which modifies the disclosure requirements for fair value measurements. The new standard is effective for us beginning January 1, 2020, with early adoption permitted. The adoption of this standard is not expected to have a material impact on our financial statements.

In January 2017, the FASB issued ASU 2017-04, which, among other provisions, eliminates “step 2” from the goodwill impairment test. The annual, or interim, goodwill impairment test will be performed by comparing the fair value of a reporting unit with its carrying amount. An impairment charge should be recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. The new standard is effective for us beginning January 1, 2020, with early adoption permitted. The adoption of this standard is not expected to have a material impact on our financial statements.

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), which modifies the measurement of expected credit losses of certain financial instruments, including accounts receivable. The new standard is effective for us beginning January 1, 2020, with early adoption permitted. The adoption of this standard is not expected to have a material impact on our financial statements.

2. Income Tax Expense

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

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

10

Our policy is to classify interest and penalties related to unrecognized tax benefits as income tax expense. Our 2019 income tax expense varies from the statutory rate mainly due to the generation of federal and state tax credits, permanent items, and different statutory rates from our foreign subsidiaries. Additionally, in the first quarter of 2019, we recognized certain discrete items primarily related to the exercise of stock options. Our 2018 income tax expense varied from the statutory rate mainly due to federal and state tax credits, permanent items, different statutory rates from our foreign entities, and discrete stock option exercises.

We have reviewed the tax positions taken, or to be taken, in our tax returns for all tax years currently open to examination by a taxing authority. As of June 30, 2019, the gross amount of unrecognized tax benefits exclusive of interest and penalties was $753,000. We remain subject to examination until the statute of limitations expires for each respective tax jurisdiction. The statute of limitations will be open with respect to these tax positions until 2026. A reconciliation of beginning and ending amount of our unrecognized tax benefits is as follows:

	Six months ended June 30, 2019
	(in thousands)
Unrecognized tax benefits as of December 31, 2018	$	711
Additions for tax positions of current year		37
Additions for tax positions of prior years		5
Reductions for settlements with taxing authorities		-
Reductions for lapses of the applicable statutes of limitations		-
Unrecognized tax benefits as of June 30, 2019	$	753

As of June 30, 2019, a summary of the tax years that remain subject to examination in our taxing jurisdictions is as follows:

United States	2015 and forward
Foreign	2012 and forward

3. Inventories and Other Deferred Costs

Inventories and other deferred costs consist of the following:  

	June 30, 2019		December 31, 2018
	(in thousands)
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

We had inventory on consignment of $1.9 million and $1.7 million at June 30, 2019 and December 31, 2018, respectively.

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

4. Acquisitions and Divestitures

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

11

With the exception of Cardial discussed below, our acquisitions have historically been made at prices above the fair value of the acquired identifiable assets, resulting in goodwill, due to expectations of synergies that will be realized by combining businesses. These synergies include the use of our existing sales channel to expand sales of the acquired businesses’ products and services, consolidation of manufacturing facilities, and the leveraging of our existing administrative infrastructure. The fair market valuations associated with these transactions fall within Level 3 of the fair value hierarchy, due to the use of significant unobservable inputs to determine fair value. The fair value measurements were calculated using unobservable inputs, primarily using the income approach, specifically the discounted cash flow method. The amount and timing of future cash flows within our analysis was based on our due diligence models, most recent operational budgets, long range strategic plans and other estimates. Our assumptions associated with these Level 3 valuations are discussed below and in Note 13 to these financial statements.

Cardial

On October 22, 2018, through a newly created subsidiary LeMaitre Cardial SAS, we entered into an agreement to acquire the business assets of Cardial, a company located in Saint-Etienne, France. The Cardial business consists of the manufacturing of polyester vascular grafts, valvulotomes, surgical glue and original equipment manufacturing (OEM) services. On the same date, the parties entered into a separate agreement under which LeMaitre Cardial SAS purchased the building and land previously owned by Cardial.

The purchase price for the acquired assets, including the land and building, inventory, machinery and equipment, intellectual property, permits and approvals, data and records, and customer and supplier information, was €2.0 million ($2.3 million). At closing, €1.1 million ($1.3 million) was paid in cash, and €0.5 million ($0.5 million) of liabilities were assumed by LeMaitre Cardial SAS. Another €0.4 million ($0.4 million) is due in two installments, half to be paid twelve months after the closing date, and half eighteen months after the closing date. There are no contingencies associated with these holdback payments, although they may be reduced depending upon the results of a reconciliation of the value of inventory transferred, as outlined in the agreement, or for certain post-closing claims. 

The following table summarizes the preliminary purchase price allocation:     

	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

The bargain purchase gain was recorded to reflect the excess of the net assets acquired over the purchase price. We recorded deferred taxes on this gain of €0.5 million ($0.6 million), resulting in a net gain of €1.4 million ($1.6 million).

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

	Allocated Fair Value		Weighted Average Useful Life
	(in thousands)		(in years)
Customer relationships	€	250		16.0
Intellectual property		237		5.0
Non-compete agreement		46		5.0
Tradenames		90		5.0
Total intangible assets	€	623

The weighted-average amortization period of the acquired intangible assets was 9.4 years.

12

Applied Medical

On September 20, 2018, we entered into an agreement to acquire the assets of the embolectomy catheter business of Applied Medical Resources Corporation (Applied). The acquired business consists of several embolectomy, thrombectomy and irrigation catheter product lines which are sold worldwide (approximately 60% in the U.S. and 40% outside the U.S.). On the same date, we entered into a transition services agreement under which Applied will manufacture and supply us with inventory for a period of twelve months, unless extended by both parties.

The purchase price for the acquired assets, which included inventory, machinery and equipment, intellectual property, permits and approvals, data and records, and customer and supplier information, was $14.2 million. Of this amount, $11 million was paid at closing, with another $2 million due 12 months following the closing date, and the final $1.2 million due 24 months following the closing date.   The deferred amounts totaling $3.2 million were recorded at an acquisition-date fair value of $3.0 million using a discount rate of 3.75% to reflect the time value of money between the acquisition date and the payment due dates. There are no contingencies associated with these holdback payments, although they may be reduced for certain post-closing claims.

The following table summarizes the purchase price allocation:    

	Allocated
	Fair Value
	(in thousands)
Inventory	$	739
Equipment and supplies		416
Intangible assets		6,527
Goodwill		6,361
Purchase price	$	14,043

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

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

	Allocated Fair Value		Weighted Average Useful Life
	(in thousands)		(in years)
Customer relationships	$	4,475		16.0
Intellectual property		1,316		7.0
Non-compete agreement		530		5.0
Tradenames		206		7.0
Total intangible assets	$	6,527

The weighted-average amortization period of the acquired intangible assets was 13.0 years.

13

Reddick Divestiture 

On April 5, 2018, we entered into an agreement to sell the inventory, intellectual property and other assets associated exclusively with our Reddick cholangiogram catheter and Reddick-Saye screw product lines for $7.4 million to Specialty Surgical Instrumentation. Concurrent with this divestiture we entered into a transition services agreement under which we will continue to manufacture and supply these products to the buyer for a period of up to two years unless extended by both parties, as well as a balloon supply agreement under which we will supply balloons, a component of the cholangiogram catheters, to the buyer for a period of up to six years unless extended by both parties. We recorded a gain during the quarter ended June 30, 2018 in connection with these agreements of $5.9 million. The following table summarizes the allocation of consideration received:

	Allocated
	Fair Value
	(in thousands)
Inventory	$	308
Deferred revenue - transition services agreement		1,081
Goodwill		135
Gain on divestiture		5,876
Consideration received	$	7,400

Under the terms of the transition services agreement, we have agreed to manufacture the Reddick products for the buyer at prices at or in some cases below our cost. We allocated a portion of the consideration received to this agreement to reflect it at fair value and recorded it as deferred revenue. As the products are sold to the buyer, we amortize a portion of the deferred revenue to adjust the gross margin on the sale to fair value on a specific identification basis. As of June 30, 2019, the remaining unamortized balance was $0.2 million. Additionally, as the Reddick product lines that were divested constituted a business, we allocated a portion of our goodwill to this divestiture based on the fair value of the business sold in relation to the fair value of the business that will be retained.

Subsequent Event

On July 12, 2019, we entered into an agreement with UreSil, LLC, an Illinois limited liability company, to purchase the remaining assets of their Tru-Incise valve cutter business, including distribution rights in the United States, for $8.0 million. We also entered into a transition services agreement under which UreSil, LLC will continue to manufacture the acquired products for us for a specified time, until we transition the full manufacturing process to our Burlington, Massachusetts facilities.

5. Goodwill and Other Intangibles

Goodwill consists of the following as of June 30, 2019:

	(in thousands)
Balance at December 31, 2018	$	29,868
Effects of currency exchange		(8	)
Balance at June 30, 2019	$	29,860

 Other intangible assets consist of the following:

	June 30, 2019						December 31, 2018
	Gross				Net		Gross				Net
	Carrying		Accumulated		Carrying		Carrying		Accumulated		Carrying
	Value		Amortization		Value		Value		Amortization		Value
	(in thousands)
Product technology and intellectual property	$	11,728	$	6,252	$	5,476	$	11,728	$	5,726	$	6,002
Trademarks, tradenames and licenses		2,246		1,626		620		2,246		1,561		685
Customer relationships		10,093		3,920		6,173		10,065		3,806		6,259
Other intangible assets		2,143		1,780		363		2,145		1,399		746
Total identifiable intangible assets	$	26,210	$	13,578	$	12,632	$	26,184	$	12,492	$	13,692

14

These intangible assets are being amortized over their useful lives ranging from 2 to 16 years. The weighted-average amortization period for these intangibles as of June 30, 2019 is 9.7 years. Amortization expense is included in general and administrative expense and was as follows for the periods indicated.

	Three months ended June 30,				Six months ended June 30,
	2019		2018		2019		2018
	(in thousands)				(in thousands)
Amortization expense	$	556	$	414	$	1,111	$	832

We estimate that amortization expense for the remainder of 2019 and for each of the five succeeding fiscal years will be as follows: 

	Year ended December 31,
	2019		2020		2021		2022		2023		2024
	(in thousands)
Amortization expense	$	1,010	$	1,857	$	1,624	$	1,420	$	1,346	$	1,182

6. Leases

We conduct the majority of our operations in leased facilities, all of which are accounted for as operating leases, as they do not meet the criteria for finance leases. Our principal worldwide executive, distribution, and manufacturing operations are located at three adjacent 27,098 square foot, 27,289 square foot and 15,642 square foot leased facilities, as well as a fourth nearby 12,878 square foot leased facility, in Burlington, Massachusetts. Each of our Burlington leases expires in December 2023. In addition, our international operations are headquartered at a 16,470 square foot leased facility located in Sulzbach, Germany, including approximately 3,630 square feet added in 2019, under a lease which expires in August 2023. This lease contains two five-year renewal options. In addition, we have smaller long-term leased sales, marketing and other facilities located in Arizona, Japan, Canada, Australia, Singapore and China, and short-term leases in Italy, Spain and Fox River Grove, Illinois. Our lease in Canada contains a five-year renewal option exercisable in February 2023. Our leases in Germany and Australia are subject to periodic rent increases based on increases in the consumer price index as measured each September and May, respectively, with such increases applicable to the subsequent twelve months of lease payments. None of our noncancelable lease payments include non-lease components such as maintenance contracts; we generally reimburse the landlord for direct operating costs associated with the leased space. We have no subleases, and there are no residual value guarantees associated with, or restrictive covenants imposed by, any of our leases. There were no assets held under capital leases at June 30, 2019.

We also lease automobiles under operating leases in the U.S. as well as certain of our international subsidiaries. The terms of these leases are generally three years, with older vehicles replaced by newer vehicles from time to time.

As discussed above under Recent Accounting Pronouncements, on January 1, 2019 we adopted the provisions of ASU No. 2016-02, Leases (Topic 842), subsequently amended by ASU 2018-11, Leases (Topic 842): Targeted Improvements. Under the new guidance, we are required to recognize the following for all leases (with the exception of short-term leases) at the commencement date: a lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis; and a right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term.

Our most significant judgment involved in determining the amounts to initially record as lease liabilities and right-of-use assets was the estimation of a discount rate; because we have no debt we have no incremental borrowing rate to reference. We therefore estimated an incremental borrowing rate using quotes from potential lenders as the primary inputs, augmented by other available information. The resulting rate selected was 5.25%. We determined that it was appropriate to apply this single rate to our portfolio of leases worldwide, as the lease terms and conditions are substantially similar, and because we believe our subsidiaries would be unable to obtain borrowings on their own without a commitment of parent company support.

15

Additional information with respect to our leases is as follows:

	Three months ended			Six months ended
	June 30, 2019			June 30, 2019
	(in thousands)			(in thousands)
Lease cost
Operating lease cost	$	432		$	854
Short-term lease cost		63			131
Total lease cost	$	495		$	985
Other information
Cash paid for amounts included in the measurement of operating lease liabilities	$	445		$	959
Right-of-use assets obtained in exchange for new operating leae liabilities	$	594		$	810
Weighted average remaining lease term - operating leases (in years)		4.1			4.1
Weighted average discount rate - operating leases (in years)		5.25	%		5.25	%

At June 30, 2019, the minimum noncancelable operating lease rental commitments with initial or remaining terms of more than one year are as follows:

Remainder of 2019	$	1,080
Year ending December 31,
2020		1,997
2021		1,863
2022		1,522
2023		1,249
Adjustment to net present value as of June 30, 2019		(861	)
Minimum noncancelable lease liability	$	6,850

16

7. Accrued Expenses and Other Long-term Liabilities

Accrued expenses consist of the following:

	June 30, 2019		December 31, 2018
	(in thousands)
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

As discussed in Note 4 above, deferred revenue relates to our divestiture of the Reddick product line and an associated transition services agreement that we entered into at the time of the divestiture, under which we agreed to manufacture and sell product to the buyer at prices at or below our cost. We allocated a portion of the consideration received from the divestiture to this transition services agreement to reflect it at fair value and recorded it as deferred revenue. As the products are sold to the buyer, which we expect will occur over approximately the next three months, we amortize a portion of the deferred revenue to adjust the gross margin on the sale to fair value on a specific identification basis. The following table summarizes the changes in the deferred revenue balance during the six months ended June 30, 2019:

	June 30, 2019
	(in thousands)
Beginning contract liability balance	$	552
Revenue recognized upon satisfaction of performance obligations in the period		(364	)
Ending balance	$	188

Other long-term liabilities consist of the following:

	June 30, 2019		December 31, 2018
	(in thousands)
Aquisition-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

Under Accounting Standards Codification Topic 280, Segment Reporting, operating segments are defined as components of an enterprise for which separate, discrete financial information is available and evaluated by the chief operating decision-maker in making decisions on how to allocate resources and assess performance. We view our operations and manage our business as one operating segment. No discrete operating information is prepared by us except for sales by product line and by legal entity for local reporting purposes.

17

Most of our revenues are generated in the United States, Germany, and other European countries as well as in Canada, Japan and China. Substantially all of our assets are located in the United States. Net sales to unaffiliated customers by country were as follows:

	Three months ended				Six months ended
	June 30,				June 30,
	2019		2018		2019		2018
	(in thousands)				(in thousands)
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

Our Third Amended and Restated 2006 Stock Option and Incentive Plan allows for granting of incentive stock options, non-qualified stock options, stock appreciation rights, restricted stock units, unrestricted stock awards and deferred stock awards to our officers, employees, directors and consultants. The components of share-based compensation expense were as follows:

	Three months ended				Six months ended
	June 30,				June 30,
	2019		2018		2019		2018
	(in thousands)				(in thousands)
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 is included in our statements of operations as follows:

	Three months ended June 30,				Six months ended June 30,
	2019		2018		2019		2018
	(in thousands)				(in thousands)
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 stock-based compensation	$	694	$	636	$	1,440	$	1,257

We did not grant any options during the six-month periods ended June 30, 2019 or 2018. Awards of restricted stock units during both periods were immaterial.

We issued approximately 141,000 and 92,000 shares of common stock following the exercise or vesting of underlying stock options or restricted stock units during the six months ended June 30, 2019 and 2018, respectively.

18

10. Net Income per Share

The computation of basic and diluted net income per share was as follows: 

	Three months ended				Six months ended
	June 30,				June 30,
	2019		2018		2019		2018
	(in thousands, except per share data)				(in thousands, except per share data)
Basic:
Net income available for common stockholders	$	4,624	$	8,751	$	8,137	$	12,604
Weighted average shares outstanding		19,680		19,320		19,660		19,301
Basic earnings per share	$	0.23	$	0.45	$	0.41	$	0.65
Diluted:
Net income available for common stockholders	$	4,624	$	8,751	$	8,137	$	12,604
Weighted-average shares outstanding		19,680		19,320		19,660		19,301
Common stock equivalents, if dilutive		566		940		566		942
Shares used in computing diluted earnings per common share		20,246		20,260		20,226		20,243
Diluted earnings per share	$	0.23	$	0.43	$	0.40	$	0.62
Shares excluded in computing diluted earnings per share as those shares would be anti-dilutive		531		214		537		214

11. Stockholders’ Equity

Share Repurchase Program

On February 14, 2019, our Board of Directors authorized the repurchase of up to $10.0 million of the Company’s common stock through transactions on the open market, in privately negotiated purchases or otherwise. The repurchase program may be suspended or discontinued at any time and will conclude on February 14, 2020, unless extended by the Board. To date we have not made any repurchases under this program.

Dividends

In February 2011, our Board of Directors approved a policy for the payment of quarterly cash dividends on our common stock. Future declarations of quarterly dividends and the establishment of future record and payment dates are subject to approval by our Board of Directors on a quarterly basis. The dividend activity for the periods presented is as follows:

Record Date	Payment Date	Per Share Amount		Dividend Payment
				(in thousands)
Fiscal Year 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, our Board of Directors approved a quarterly cash dividend on our common stock of $0.085 per share payable on September 5, 2019, to stockholders of record at the close of business on August 21, 2019, which will total approximately $1.7 million.

19

12. Supplemental Cash Flow Information

	Six Months Ended
	June 30.
	2019		2018
	(in thousands)
Cash paid for income taxes, net	$	4,157	$	3,140

13. Fair Value Measurements

The fair value accounting guidance requires that assets and liabilities carried at fair value be classified and disclosed in one of the following three categories:

• Level 1 — Quoted prices in active markets for identical assets or liabilities.

• Level 2 — Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

• Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. This includes certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs.

Level 1 assets being measured at fair value on a recurring basis as of June 30, 2019 included our short-term investment mutual fund account.

We had no Level 2 assets being measured at fair value on a recurring basis as of June 30, 2019.

Several of our assets and liabilities related to prior acquisitions were measured using Level 3 techniques. During 2016, we recorded contingent liabilities associated with our acquisitions of the RestoreFlow allograft and ProCol biologic graft businesses. In the case of the RestoreFlow allograft acquisition, the agreement included the potential for us to pay up to $5.1 million of additional consideration, with $1.1 million contingent on the continued employment by LeMaitre Vascular of certain retained employees, and another $4.0 million contingent on the achievement of specified levels of revenues in the first 12 and 24 months following the acquisition date. This additional consideration was initially valued in total at $1.0 million and was being re-measured each reporting period until the payment requirement ended, with any adjustments reported in income from operations. The first portion related to continued employment by LeMaitre Vascular of retained individuals was paid during 2018. The amounts attributable to achieving specified levels of revenue following the acquisition date were not paid as the associated revenue metrics were not achieved. In the case of ProCol, additional consideration was payable to the former shareholders for a three-year period following the closing, calculated at 10% of ProCol revenues. This additional consideration was initially valued at $0.3 million and was being re-measured each reporting period until the payment requirement ended, with any adjustments reported in income from operations. The following table provides a rollforward of the fair value of these liabilities, as determined by Level 3 unobservable inputs including management’s forecast of future revenues for these acquired businesses, as well as, in the case of the RestoreFlow allograft acquisition, management’s estimate of the likelihood of continued employment of certain retained employees.

20

	Six months ended June 30,
	2019			2018
	(in thousands)
Beginning balance	$	72		$	1,300
Additions		-			-
Payments		(59	)		(1,142	)
Change in fair value included in earnings		(13	)		42
Ending balance	$	-		$	200

14. Accumulated Other Comprehensive Loss

Changes to our accumulated other comprehensive loss consisted primarily of foreign currency translation for the six months ended June 30, 2019 and 2018 were as follows:

	Six months ended
	June 30,
	2019			2018
	(in thousands)
Beginning balance	$	(3,900	)	$	(2,289	)
Other comprehensive income (loss) before reclassifications		82			(918	)
Amounts reclassified from accumulated other comprehensive loss		-			-
Ending Balance	$	(3,818	)	$	(3,207	)

21

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

This Quarterly Report on Form 10-Q contains forward-looking statements (within the meaning of the U.S. Private Securities Litigation Reform Act of 1995) that involve substantial risks and uncertainties. All statements, other than statements of historical facts, included in this report regarding our strategy, future operations, future financial position, future net sales, projected costs, projected expenses, prospects and plans and objectives of management are forward-looking statements. The words “anticipates,” “believes,” “estimates,” “expects,” “intends,” “may,” “plans,” “projects,” “will,” “would,” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. We have based these forward-looking statements on our current expectations and projections about future events. Although we believe that the expectations underlying any of our forward-looking statements are reasonable, these expectations may prove to be incorrect, and all of these statements are subject to risks and uncertainties. Should one or more of these risks and uncertainties materialize, or should underlying assumptions, projections, or expectations prove incorrect, our actual results, performance, or financial condition may vary materially and adversely from those anticipated, estimated, or expected. These risks and uncertainties include, but are not limited to: the acceleration or deceleration of product growth rates; the risk of significant fluctuations in our quarterly and annual results due to numerous factors; the risk that we may not be able to maintain our recent levels of profitability; the risk that the Company may not realize the anticipated benefits of its strategic activities; the risk that assumptions about the market for the Company’s products and the productivity of the Company’s direct sales force and distributors may not be correct; risks related to the integration of acquisition targets; risks related to product demand and market acceptance of the Company’s products and pricing; the risk that a recall of our products could result in significant costs or negative publicity; the risk that the Company is not successful in transitioning to a direct-selling model in new territories.

Forward-looking statements reflect management’s analysis as of the date of this quarterly report. Further information on potential risk factors that could affect our business and financial results is detailed in Part II, Item 1A, “Risk Factors” in this Quarterly Report on Form 10-Q and in our other filings with the Securities and Exchange Commission, including under the section headed “Risk Factors” in our most recent Annual Report on Form 10-K. Given these risks, uncertainties and other factors, you should not place undue reliance on these forward-looking statements. The following discussion and analysis should be read in conjunction with our consolidated financial statements and the related notes included in this report and our other SEC filings, including our audited consolidated financial statements and the related notes contained in our Annual Report on Form 10-K for the year ended December 31, 2018, as filed with the SEC on March 11, 2019. We do not assume any obligation to update any forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by law. Unless the context indicates otherwise, references to “LeMaitre Vascular,” “we,” “our,” and “us” in this Quarterly Report on Form 10-Q refer to LeMaitre Vascular, Inc. and its subsidiaries.

LeMaitre, AnastoClip, Cardial, Omniflow, ProCol, RestoreFlow and XenoSure are registered trademarks of LeMaitre Vascular or one of its subsidiaries. This Quarterly Report on Form 10-Q also includes the registered and unregistered trademarks of other persons, which are the property of their respective owners.

Overview

We are a medical device company that develops, manufactures, and markets medical devices and implants for the treatment of peripheral vascular disease. We also provide processing and cryopreservation services of human tissue for implantation in patients. Our principal product offerings are sold throughout the world, primarily in North America, Europe and, to a lesser extent, Asia and the Pacific Rim. We estimate that the annual worldwide market for all peripheral vascular devices exceeds $5 billion, within which our core product lines address roughly $900 million. We have grown our business by using a three-pronged strategy: 1) pursuing a focused call point, 2) competing for sales of low-rivalry niche products, and 3) expanding our worldwide direct sales force while acquiring and developing complementary vascular devices. We have used acquisitions as a primary means of accessing the larger peripheral vascular device market, and we expect to continue to pursue this strategy in the future. Additionally, we have continued our efforts to expand our vascular device offerings through research and development. We currently manufacture most of our product lines at our Burlington, Massachusetts headquarters.

Our products and services are used primarily by vascular surgeons who treat peripheral vascular disease through both open surgical methods and endovascular techniques. In contrast to interventional cardiologists and interventional radiologists, neither of whom are certified to perform open surgical procedures, vascular surgeons can perform both open surgical and minimally invasive endovascular procedures, and are therefore uniquely positioned to provide a wider range of treatment options to patients.

22

Our principal product lines include the following: anastomotic clips, angioscopes, biologic vascular grafts, biologic vascular patches, carotid shunts, embolectomy catheters, occlusion catheters, powered phlebectomy devices, radiopaque marking tape, remote endarterectomy devices, surgical glue, synthetic vascular grafts, and valvulotomes. Through our RestoreFlow allografts business, we also provide services related to the processing and cryopreservation of human vascular tissue.

Our biologic offerings include vascular patches, vascular grafts and surgical glue, and in the current quarter represented 35% of worldwide sales. We generally view the biologic device segment favorably, as we believe it contains differentiated and in some cases growing product segments.

To assist us in evaluating our business strategies, we regularly monitor long-term technology trends in the peripheral vascular device market. Additionally, we consider the information obtained from discussions with the medical community in connection with the demand for our products, including potential new product launches. We also use this information to help determine our competitive position in the peripheral vascular device market and our manufacturing capacity requirements.

Our business opportunities include the following:

• the long-term growth of our direct sales force in North America, Europe, Asia and the Pacific Rim;

• the addition of complementary products through acquisitions;

• the updating of existing products and introduction of new products through research and development;

• the introduction of our products in new territories upon receipt of regulatory approvals or registrations in these territories; and

• the consolidation of, and automation of, product manufacturing at our facilities in our Burlington, Massachusetts corporate headquarters.

We sell our products and services primarily through a direct sales force. As of June 30, 2019, our sales force was comprised of 110 sales representatives in North America, Europe, Japan, China and Australia, including three export managers. We also sell our products in other geographies through distributors. Our worldwide headquarters is located in Burlington, Massachusetts. Our European headquarters is located in Sulzbach, Germany, and our Asia/Pacific Rim headquarters is located in Singapore. We also have offices located in Chandler, Arizona, Fox River Grove, Illinois, Tokyo, Japan; Vaughan, Canada; Madrid, Spain; Milan, Italy; Saint-Etienne, France; Shanghai, China; and North Melbourne, Australia. During the current quarter, approximately 94% of our net sales were generated in territories in which we employ direct sales representatives.

Historically we have experienced success in lower-rivalry niche product segments, for example the markets for valvulotomes and carotid shunts. In both markets, our highly differentiated devices have historically allowed us to increase selling prices while maintaining unit market share. In contrast, more recently, we have faced increased competition in the biologic vascular patch segment, which has inhibited our ability to implement selling price increases. While we believe that these challenging market dynamics can be mitigated by our relationships with vascular surgeons, there can be no assurance that we will be successful in these highly competitive markets.

In recent years we have also experienced success in international markets, such as Europe, where we sell at comparatively lower average selling prices. If we continue to seek sales growth opportunities outside of North America, we may experience downward pressure on our gross margin.

Because we believe that direct-to-hospital sales engender closer customer relationships, and allow for higher selling prices and gross margins, we periodically enter into transactions with our distributors to transition their sales of our medical devices into our direct sales organization:

• In March 2018, we terminated our master distribution agreement with Sinopharm United Medical Device Co., Ltd. (Sinopharm), under which we sold our powered phlebectomy devices for distribution in China. In April 2018, we began selling these products to sub-distributors in China.  In June 2019, we agreed to purchase at a discount all of Sinopharm’s remaining inventory of our powered phlebectomy devices in settlement of the suit they filed against us in China.

• During 2018, we entered into definitive agreements with several former Applied Medical and Cardial distributors in Europe and Asia in order to terminate their distribution of our recently-acquired embolectomy catheter, polyester graft and valvulotome products, and we began selling direct-to-hospitals in those geographies. The termination fees totaled approximately $0.1 million.

23

As of June 30, 2019, we had 110 sales representatives versus 102 at June 30, 2018. This increase has resulted in higher selling expenses.

Our strategy for growing our business includes the acquisition of complementary product lines and companies and occasionally the discontinuance or divestiture of products or activities that are no longer complementary:

• In April 2018, we divested our Reddick cholangiogram catheter and Reddick-Saye screw product lines to Specialty Surgical Instrumentation for $7.4 million.

• In September 2018, we acquired the assets of the embolectomy catheter business from Applied Medical for $14.2 million. We have initiated a project to transfer the manufacturing of the acquired devices to our Burlington facility. We expect this transition to be completed in 2019.

• In October 2018, we acquired the assets of Cardial, a subsidiary of Becton, Dickinson, located in Saint-Etienne, France, for €2.0 million. Cardial’s product lines include polyester vascular grafts, valvulotomes and surgical glue.

In addition to relying upon acquisitions for growth, we also rely on internal product development efforts to bring differentiated technology and next-generation products to market:

• In 2017, we launched XenoSure biologic pledgets.

• In 2017, we launched a longer version of our Anastoclip AC intended for use in neurosurgery applications.

• In 2018, we expanded the indications for our Anastoclip GC in the United States to include dura tissue repair.

• In 2019, we initiated limited market releases for our newly developed XenoSure Plus products.  

In addition to our sales growth strategies, we have also executed several operational initiatives designed to consolidate and streamline manufacturing within our Burlington, Massachusetts facilities. We expect these plant consolidations will result in improved control over our production capacity as well as reduced costs over the long-term. Our most recent manufacturing transitions included:

• In 2016, we initiated a project to transfer the manufacturing of the ProCol biologic product line to our facility in Burlington. This transfer was completed in 2018.

• In 2017, we expanded the Burlington clean rooms in which many of our biologic offerings are currently produced or processed. The cost of the facility renovation was approximately $3.0 million. We are in the process of further expanding this clean room, which we expect to complete in early 2020 at a cost of approximately $1.1 million, in order to transfer in the manufacture of our OmniFlow ovine biologic graft from our North Melbourne, Australia facility.

• In September 2018, we acquired the embolectomy catheter business assets from Applied Medical. We immediately initiated a project to transfer the manufacturing of these devices to our Burlington facility. We expect this transfer to be completed in 2019.

Our execution of these business opportunities may affect the comparability of our financial results from period to period and may cause fluctuations from period to period as we incur related process engineering and other charges.

Fluctuations in the rate of exchange between the U.S. dollar and foreign currencies, primarily the Euro, affect our financial results. For the six months ended June 30, 2019, approximately 47% of our sales took place outside the United States, and in most cases in currencies other than the U.S. dollar. We expect that sales in foreign currencies will represent a significant percentage of our future sales. Selling, marketing, and administrative expenses related to these sales are similarly denominated in foreign currencies, partially mitigating our exposure to exchange rate fluctuations. However, if there is an increase in the rate at which a foreign currency is exchanged for U.S. dollars, it will require more of the foreign currency to equal a specified amount of U.S. dollars than before the rate increase. In such cases we will receive less revenue in U.S. dollars than we did before the rate increase went into effect. For the six months ended June 30, 2019, we estimate that the effects of changes in foreign exchange rates decreased sales by approximately $1.6 million, as compared to rates in effect for the six months ended June 30, 2018.

24

Net Sales and Expense Components

The following is a description of the primary components of our net sales and expenses:

Net sales. We derive our net sales from the sale of our products and services, less discounts and returns. Net sales include the shipping and handling fees paid for by our customers. Most of our sales are generated by our direct sales force and are shipped and billed to hospitals or clinics throughout the world. In countries where we do not have a direct sales force, sales are primarily to distributors, who in turn sell to hospitals and clinics. In certain cases our products are held on consignment at a hospital or clinic prior to purchase; in those instances we recognize revenue at the time the product is used in surgery rather than at shipment.

Cost of sales. We manufacture the majority of the products that we sell. Our cost of sales consists primarily of manufacturing personnel, raw materials and components, depreciation of property and equipment, and other allocated manufacturing overhead, as well as freight expense we pay to ship products to customers.

Sales and marketing. Our sales and marketing expense consists primarily of salaries, commissions, stock based compensation, travel and entertainment, sales meetings, attendance at vascular congresses, training programs, advertising and product promotions, direct mail and other marketing costs.

General and administrative. General and administrative expense consists primarily of executive, finance and human resource salaries, stock based compensation, legal and accounting fees, information technology expense, intangible asset amortization expense and insurance expense.

Research and development. Research and development expense includes costs associated with the design, development, testing, enhancement and regulatory approval of our products, principally salaries, laboratory testing and supply costs. It also includes costs associated with design and execution of clinical studies, regulatory submissions and costs to register, maintain, and defend our intellectual property, and royalty payments associated with licensed and acquired intellectual property.

Other income (expense). Other income (expense) primarily includes interest income and expense, foreign currency gains (losses), and other miscellaneous gains (losses).

Income tax expense. We are subject to federal and state income taxes for earnings generated in the United States, which include operating losses in certain foreign jurisdictions for certain years depending on tax elections made, and foreign taxes on earnings of our wholly-owned foreign subsidiaries. Our consolidated tax expense is affected by the mix of our taxable income (loss) in the United States and foreign subsidiaries, permanent items, discrete items, unrecognized tax benefits, and amortization of goodwill for U.S tax reporting purposes.

Results of Operations

Comparison of the three and six months ended June 30, 2019 to the three and six months ended June 30, 2018:

The following tables set forth, for the periods indicated, our net sales by geography, and the change between the specified periods expressed as a percentage increase or decrease: 

	Three months ended June 30,							Six months ended June 30,
(unaudited)					Percent							Percent
	2019		2018		change			2019		2018		change
	($ in thousands)							($ in thousands)
Net sales	$	29,483	$	27,020		9	%	$	57,962	$	53,014		9	%
Net sales by geography:
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	%
Total	$	29,483	$	27,020		9	%	$	57,962	$	53,014		9	%

25

Net sales. Net sales increased $2.5 million or 9% to $29.5 million for the three months ended June 30, 2019, compared to $27.0 million for the three months ended June 30, 2018. The increase was due primarily to higher sales of embolectomy catheters which grew $1.1 million, of which $1.0 million was from our recently-acquired Syntel and Python products. Sales of polyester grafts increased $0.5 million, of which $0.3 million was from our recently-acquired Cardial products. Allograft sales also increased by $0.5 million. Net sales increased $5.0 million or 9% to $58.0 million for the six months ended June 30, 2019, compared to $53.0 million for the six months ended June 30, 2018. The six-month sales increase was also comprised primarily of embolectomy catheters of $2.4 million and polyester grafts of $1.0 million, both of which were driven by the recent acquisitions. Sales of carotid shunts were higher by $0.5 million, and allografts by $0.4 million. We estimate that the strengthening U.S. dollar during the six months ended June 30, 2019 as compared to the six months ended June 30, 2018 decreased net sales by $1.6 million.

Direct-to-hospital net sales were 94% of our total net sales for each of the three and six month periods ended June 30, 2019 and 2018, respectively.

Net sales by geography. Net sales in the Americas increased $1.4 million or 9% for the three months ended June 30, 2019 as compared to June 30, 2018, due primarily to increased sales of embolectomy catheters of $0.8 million, allografts of $0.5 million and carotid shunts of $0.2 million. These increases were partly offset by decreased sales of powered phlebectomy systems of $0.3 million. For the six months ended June 30, 2019, sales in the Americas increased $1.9 million or 6%. For the six-month period, increased sales of embolectomy catheters of $1.6 million, carotid shunts of $0.4 million and allografts of $0.4 million were partly offset by decreased sales of powered phlebectomy systems of $0.4 million.

Europe, Middle East and Africa (“EMEA”) net sales increased $0.9 million, or 10% for the three months ended June 30, 2019 as compared to June 30, 2018. The increase was primarily driven by higher sales of polyester grafts of $0.4 million, as well as embolectomy catheters, valvulotomes and surgical glue, each increasing $0.1 million, largely driven by our recent acquisitions. For the six months ended June 30, 2019, sales in EMEA increased $2.2 million or 12%. Increases were primarily driven by higher sales of polyester grafts of $0.9 million, OEM sales of $0.5 million, and increased sales of valvulotomes, embolectomy catheters and surgical glue of $0.3 million each. We estimate that the weaker Euro during the six months ended June 30, 2019 decreased our net sales by $1.2 million in EMEA as compared to the six months ended June 30, 2018.

Asia/Pacific Rim (“APAC”) net sales increased $0.1 million, or 5% for the three months ended June 30, 2019 as compared to June 30, 2018. Sales of embolectomy catheters increased $0.3 million, and carotid shunts and biologic patches each increased by $0.1 million, and were partly offset by decreased sales of powered phlebectomy systems of $0.3 million. For the six months ended June 30, 2019, sales in APAC increased $0.8 million, or 25%, driven mainly by higher sales of embolectomy catheters of $0.6 million, carotid shunts of $0.2 million and anastomotic clips of $0.1 million.

The following table sets forth the change in our gross profit and gross margin for the periods indicated:

	Three months ended June 30,												Six months ended June 30,
(unaudited)										Percent												Percent
	2019			2018			Change			change			2019			2018			Change			change
	($ in thousands)												($ in thousands)
Gross profit	$	20,315		$	18,992		$	1,323			7	%	$	39,779		$	37,466		$	2,313			6	%
Gross margin		68.9	%		70.3	%		(1.4%	)		*			68.6	%		70.7	%		(2.1%	)		*

*Not applicable

Gross Profit. Gross profit increased $1.3 million to $20.3 million for the three months ended June 30, 2019, while gross margin decreased 140 basis points to 68.9% in the period. For the six months ended June 30, 2019, gross profit increased by $2.3 million to $39.8 million, while gross margin decreased 210 basis points to 68.6%. In both comparative periods the increase in gross profit was driven by higher sales in the current period. Primarily the recently acquired Syntel and Python embolectomy catheters as well as the recently acquired Cardial products, all of which carry a relatively lower gross margin than many of our other product lines, drove the decrease in gross margin in both comparative periods. In the first quarter of 2018, we were also still selling our relatively higher gross margin Reddick and Reddick-Saye products, which we divested early in the second quarter of 2018. The impact of these gross margin decreases was partly offset by lower manufacturing costs of certain of our offerings, in particular allografts.

26

Operating Expenses 

The following tables set forth changes in our operating expenses for the periods indicated and the change between the specified periods expressed as a percentage increase or decrease:

	Three months ended June 30,											Six months ended June 30,
(unaudited)									Percent										Percent
	2019		2018			$ Change			change			2019		2018			$ Change		change
Sales and marketing	$	7,613	$	6,792		$	821			12	%	$	15,458	$	13,882		$	1,576		11	%
General and administrative		4,531		4,547			(16	)		(0%	)		9,475		9,244			231		2	%
Research and development		2,256		1,988			268			13	%		4,496		3,813			683		18	%
(Gain) loss on divestitures		-		(5,876	)		5,876			*			-		(5,876	)		5,876		*
Total	$	14,400	$	7,451		$	6,949			93	%	$	29,429	$	21,063		$	8,366		40	%

	Three months ended June 30,									Six months ended June 30,
	2019			2018						2019			2018
	% of Net Sales			% of Net Sales			Change			% of Net Sales			% of Net Sales			Change
Sales and marketing		26	%		25	%		1	%		27	%		26	%		1	%
General and administrative		15	%		17	%		(2%	)		16	%		17	%		(1%	)
Research and development		8	%		7	%		1	%		8	%		7	%		1	%
(Gain) loss on divestitures		0	%		(22%	)		22	%		0	%		-11	%		11	%

* Not a meaningful percentage relationship.

Sales and marketing. For the three months ended June 30, 2019, sales and marketing expense increased 12% to $7.6 million. The increase was driven mainly by higher personnel costs, including salaries, recruiting and travel expenses associated with expanding the sales force. We also had higher costs due to the implementation of Salesforce customer relationship software. As a percentage of net sales, sales and marketing expense increased to 26% in the three months ended June 30, 2019 from 25% in the prior period. For the six months ended June 30, 2019, sales and marketing expense increased 11% to $15.5 million. The increase was driven mainly by higher personnel costs including compensation, travel and training. These increases were partly offset by lower sales force commissions and travel. As a percentage of sales, sales and marketing expense increased to 27% in the six months ended June 30, 2019 from 26% in the prior period.

General and administrative. For the three months ended June 30, 2019, general and administrative expense was unchanged as compared to the three months ended June 30, 2018, at $4.5 million. We incurred higher compensation costs of $0.1 million, related primarily to severance associated with our planned relocation of production of our biologic grafts from Australia to Burlington, offset by lower acquisition and divestiture-related costs. As a percentage of sales, general and administrative expense decreased to 15% for the three months ended June 30, 2019, from 17% in the prior period. For the six months ended June 30, 2019, general and administrative expense increased 2% to $9.5 million. The general and administrative expense increase was driven by higher compensation costs, bad debt expense and facilities costs, offset by lower professional fees and acquisition costs. As a percentage of sales, general and administrative expense was 16% for the six months ended June 30, 2019 versus 17% for the six months ended June 30, 2018.

Research and development. For the three months ended June 30, 2019, research and development expense increased 13% to $2.3 million.  For the six months ended June 30, 2019, research and development expense increased 18% to $4.5 million. In both periods, the increase was primarily related to product development towards new versions of our biologic vascular patches and powered phlebectomy devices, as well as testing related to our biologic product offerings, including in connection with the transfer of production of our OmniFlow biologic vascular grafts to Burlington, Massachusetts. We also had higher compensation expenses. As a percentage of sales, research and development expense increased to 8% for the three and six-month periods ended June 30, 2019, as compared to 7% in both prior year periods.

Income tax expense. We recorded a tax provision of $1.5 million on pre-tax income of $6.1 million for the three months ended June 30, 2019, compared to a $2.8 million tax provision on pre-tax income of $11.5 million for the three months ended June 30, 2018. We recorded a tax provision of $2.5 million on pre-tax income of $10.6 million for the six months ended June 30, 2019, compared to $3.9 million on pre-tax income of $16.5 million for the six months ended June 30, 2018. Our effective income tax rate was 24.0% and 23.2% for the three and six month periods ended June 30, 2019. Our tax expense for the current period is based on an estimated annual effective tax rate of 26.2%, adjusted in the applicable quarterly periods for discrete stock option exercises and other discrete items. Our income tax expense for the current period varies from the statutory rate mainly due to federal and state tax credits, permanent items, different statutory rates from our foreign entities, and a discrete item for stock option exercises.

27

Our effective income tax rate was 24.2% and 23.4% for the three and six month periods ended June 30, 2018. Our 2018 provision was based on the estimated annual effective tax rate of 24.6%, adjusted in the applicable quarterly period for discrete stock option exercises and other discrete items. Our income tax expense for 2018 varied from the statutory rate mainly due to certain permanent items, offset by lower statutory rates from our foreign entities and a discrete item for stock option exercises.

We monitor the mix of profitability by tax jurisdiction and adjust our annual expected rate on a quarterly basis as needed. While it is often difficult to predict the final outcome or timing of the resolution for any particular tax matter, we believe our tax reserves reflect the probable outcome of known contingencies.

We assess the likelihood that our deferred tax assets will be realized through future taxable income and record a valuation allowance to reduce gross deferred tax assets to an amount we believe is more likely than not to be realized. As of June 30, 2019, we have provided a valuation allowance of $1.3 million for deferred tax assets primarily related to Australian net operating loss and capital loss carry forwards and Massachusetts tax credit carry forwards that are not expected to be realized.

Liquidity and Capital Resources

At June 30, 2019, our cash and cash equivalents were $13.3 million as compared to $26.3 million at December 31, 2018. We also had $35.0 million in a short-term managed income mutual fund investment as of June 30, 2019 compared to $21.7 million as of December 31, 2018. Our cash and cash equivalents are highly liquid investments with maturities of 90 days or less at the date of purchase, and consist primarily of operating bank accounts. Our short-term marketable securities consist of a managed income mutual fund investing mainly in short-term investment grade, U.S.-dollar denominated fixed and floating-rate debt. All of our cash held outside of the United States is available for corporate use, with the exception of $4.3 million held by subsidiaries in jurisdictions for which earnings are planned to be permanently reinvested.

On February 14, 2019, our Board of Directors authorized the repurchase of up to $10.0 million of the Company’s common stock through transactions on the open market, in privately negotiated purchases or otherwise. The repurchase program may be suspended or discontinued at any time and will conclude on February 14, 2020, unless extended by the Board. To date we have not made any repurchases under this program.

Operating and Capital Expenditure Requirements 

We require cash to pay our operating expenses, make capital expenditures, and pay our long-term liabilities. Since our inception, we have funded our operations through public offerings and private placements of equity securities, short-term borrowings, and funds generated from our operations.

We recognized operating income of $10.4 million for the six months ended June 30, 2019. For the year ended December 31, 2018, we had operating income of $28.2 million. We expect to fund any increased costs and expenditures from our existing cash and cash equivalents, though our future capital requirements depend on numerous factors. These factors include, but are not limited to, the following:

• the revenues generated by sales of our products and services;

• payments associated with potential future quarterly cash dividends to our common stockholders;

• future acquisition-related payments;

• payments associated with income and other taxes;

• the costs associated with expanding our manufacturing, marketing, sales, and distribution efforts;

• the costs associated with our initiatives to sell direct-to-hospital in new countries;

• the costs of obtaining and maintaining FDA and other regulatory clearances of our existing and future products;

• the costs associated with obtaining European MDR clearances of our existing and future products;

• the number, timing, and nature of acquisitions, divestitures and other strategic transactions, and

• potential future share repurchases.

28

Our cash balances may decrease as we continue to use cash to fund our operations, make acquisitions, make payments under our quarterly dividend program, make share repurchases and make deferred payments related to prior acquisitions. We believe that our cash, cash equivalents, investments and the interest we earn on these balances will be sufficient to meet our anticipated cash requirements for at least the next twelve months. If these sources of cash are insufficient to satisfy our liquidity requirements beyond the next twelve months, we may seek to sell additional equity or debt securities or borrow funds from, or establish a revolving credit facility with a financial institution. The sale of additional equity and debt securities may result in dilution to our stockholders. If we raise additional funds through the issuance of debt securities, such securities could have rights senior to those of our common stock and could contain covenants that would restrict our operations and possibly our ability to pay dividends. We may require additional capital beyond our currently-forecasted amounts. Any such required additional capital may not be available on reasonable terms, if at all.

Dividends 

In February 2011, our Board of Directors approved a policy for the payment of quarterly cash dividends on our common stock. Future declarations of quarterly dividends and the establishment of future record and payment dates are subject to approval by our Board of Directors on a quarterly basis. The dividend activity for the periods presented is as follows: 

Record Date	Payment Date	Per Share Amount		Dividend Payment
				(in thousands)
Fiscal Year 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, our Board of Directors approved a quarterly cash dividend on our common stock of $0.085 per share payable on September 5, 2019, to stockholders of record at the close of business on August 21, 2019, which will total approximately $1.7 million.

Cash Flows

	Six months ended June 30,
	(in thousands)
	2019			2018			Net Change
Cash and cash equivalents	$	13,264		$	19,638		$	(6,374	)
Cash flows provided by (used in):
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. Net cash provided by operating activities was $4.1 million for the six months ended June 30, 2019, consisting of $8.1 million in net income, adjustments for non-cash or non-operating items of $4.7 million (including primarily depreciation and amortization of $2.6 million, stock-based compensation of $1.4 million, and provisions for inventory write-offs and doubtful accounts of $0.4 million and $0.2 million, respectively) and also a net use of working capital of $8.7 million. The net cash used for working capital was driven by an increase in inventory and other deferred costs of $5.3 million and a decrease in accounts payable and other liabilities of $4.1 million, including primarily payments associated with our annual bonus plan, dividends and income taxes. These cash uses were offset by a decrease in prepaid and other assets of $0.7 million, primarily related to prepaid taxes.

29

Net cash provided by operating activities was $8.6 million for the six months ended June 30, 2018, consisting of $12.6 million in net income, adjustments for non-cash or non-operating items of $2.1 million (including depreciation and amortization of $2.1 million, stock-based compensation of $1.3 million, provisions for inventory write-offs and doubtful accounts of $0.3 million and a gain on divestiture of $5.9 million) and also a net use of working capital of $1.9 million. The net cash used for working capital was driven by an increase in inventory and other deferred costs of $1.3 million and an increase in accounts receivable of $0.5 million, which were offset by a decrease in accounts payable and accrued expenses of $0.1 million.

Net cash used in investing activities. Net cash used in investing activities was $14.8 million for the six months ended June 30, 2019, including purchases of marketable securities of $13.2 million and expenditures on property and equipment of $1.6 million.

Net cash used in investing activities was $4.6 million for six months ended June 30, 2018. This was primarily driven by purchases of marketable securities of $10.8 million and expenditures on equipment and technology of $1.2 million, which were partially offset by proceeds from a business divestiture of $7.4 million.

Net cash used in financing activities. Net cash used financing activities was $2.4 million for the six months ended June 30, 2019, consisting primarily of dividend payments of $3.3 million, offset in part by proceeds from stock option exercises of $1.0 million net of shares repurchased to cover employee payroll taxes, and deferred payments for acquisitions of less than $0.1 million.

Net cash used in financing activities was $3.1 million for the six months ended June 30, 2018, primarily driven by cash dividends paid of $2.7 million and payments related to prior acquisitions of $1.1 million. These were partially offset by proceeds from stock option exercises of $0.7 million.

Contractual obligations. Our principal contractual obligations consist of operating leases and inventory purchase commitments, and have not changed significantly since December 31, 2018 as reported in our Annual Report on Form 10-K. As referenced below under Critical Accounting Policies and Estimates, our operating lease contractual obligations are now recorded as liabilities on our balance sheet.

Off-Balance Sheet Arrangements

We did not have any off-balance sheet arrangements as of June 30, 2019. We do not currently have, nor have we ever had, any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. In addition, we do not engage in trading activities involving non-exchange traded contracts. As a result, we are not materially exposed to any financing, liquidity, market or credit risk that could arise if we had engaged in these relationships.

Critical Accounting Policies and Estimates

We have adopted various accounting policies to prepare our consolidated financial statements in accordance with U.S. generally accepted accounting principles, or U.S. GAAP. Our most significant accounting policies are described in Note 1 to our consolidated financial statements included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2018. With the exception of the adoption, effective January 1, 2019, of Accounting Standards Update No. 2016-02, Leases (Topic 842), subsequently amended by ASU 2018-11, Leases (Topic 842): Targeted Improvements, discussed in Note 1 to this Quarterly Report on Form 10-Q, there have been no material changes in our critical accounting policies during the six months ended June 30, 2019. The preparation of our consolidated financial statements in conformity with U.S. GAAP requires us to make estimates and assumptions that affect the amounts reported in our consolidated financial statements and accompanying notes. Our estimates and assumptions, including those related to sales returns and discounts, share-based compensation, inventories, intangible assets, bad debts, and income taxes are reviewed on an ongoing basis and updated as appropriate. Actual results may differ from those estimates.

Recent Accounting Pronouncements

A summary of recent accounting pronouncements that may impact our financial statements upon adoption in future periods can be found in Note 1 to our financial statements included under Part 1, Item 1 of this Quarterly Report on Form 10-Q.

30

Item 3. Quantitative and Qualitative Disclosures About Market Risk

In the ordinary course of conducting business, we are exposed to certain risks associated with potential changes in market conditions. These market risks include changes in currency exchange rates and interest rates which could affect operating results, financial position and cash flows. We manage our exposure to these market risks through our regular operating and financing activities and, if considered appropriate, we may enter into derivative financial instruments such as forward currency exchange contracts, although we have not done so in 2019 or in recent years. There have been no material changes in our quantitative and qualitative market risks since the disclosure in our Annual Report on Form 10-K for the year ended December 31, 2018.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our management, with the participation and supervision of our Chief Executive Officer and Chief Financial Officer, is responsible for our disclosure controls and procedures pursuant to Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified under SEC rules and forms. Disclosure controls and procedures include controls and procedures designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is accumulated and communicated to our principal executive officer and our principal financial officer, as appropriate, to allow timely decisions regarding required disclosure. We design our disclosure controls and procedures to ensure, at reasonable assurance levels, that such information is timely recorded, processed, summarized and reported, and then accumulated and communicated appropriately.

Based on an evaluation of our disclosure controls and procedures as of June 30, 2019 our Chief Executive Officer and Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures were effective at reasonable assurance levels.

Changes in Internal Control

There have been no changes in our internal control over financial reporting for the six months ended June 30, 2019 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Inherent Limitations of Internal Controls

Notwithstanding the foregoing, our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and procedures or our internal controls will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any system will succeed in achieving its stated goals under all potential future conditions. Over time, control may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

31

Part II. Other Information

Item 1. Legal Proceedings

In the ordinary course of business, we are from time to time involved in lawsuits, claims, investigations, proceedings, and threats of litigation relating to employment, product liability, commercial arrangements, contracts, intellectual property and other matters. While the outcome of these proceedings and claims cannot be predicted with certainty, there are no matters, as of July 31, 2019, that management believes would have a material adverse effect on our financial position, results of operations or cash flows.

Item 1A. Risk Factors

In addition to the information set forth in this report, you should consider the risks and uncertainties discussed in “Part I, Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2018, which could materially affect our business, financial condition, or future results. There have been no substantive changes from the risk factors previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2018, which was filed with the Securities and Exchange Commission on March 11, 2019.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Recent Sales of Unregistered Securities

None.

Issuer Purchases of Equity Securities

None.

32

Item 6. Exhibits

		Incorporated by Reference
Exhibit Number	Exhibit Description	Form	Date	Number	Filed Herewith
31.1	Certification of Chief Executive Officer, as required by Rule 13a-14(a) or Rule 15 d-14(a).				X
31.2	Certification of Chief Financial Officer, as required by Rule 13a-14(a) or Rule 15d-14(a).				X
32.1	Certification by the Chief Executive Officer, as required by Rule 13a-14(b) or Rule 15d-14(b) and Section  1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. §1350).*				X
32.2	Certification by the Chief Financial Officer, as required by Rule 13a-14(b) or Rule 15d-14(b) and Section  1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. §1350).*				X
101.INS	XBRL Instance Document.				X
101.SCH	XBRL Taxonomy Extension Schema Document.				X
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document.				X
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document.				X
101.LAB	XBRL Taxonomy Extension Label Linkbase Document.				X
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document.				X

* The certifications attached as Exhibit 32.1 and Exhibit 32.2 that accompany this Quarterly Report on Form 10-Q, are not deemed filed with the SEC and are not to be incorporated by reference into any filing of LeMaitre Vascular, Inc. under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date of this Quarterly Report on Form 10-Q, irrespective of any general incorporation language contained in such filing.

33

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on August 6, 2019.

LEMAITRE VASCULAR, INC.

/s/ George W. LeMaitre

George W. LeMaitre

Chairman and Chief Executive Officer

/s/ Joseph P. Pellegrino, Jr.

Joseph P. Pellegrino, Jr.

Chief Financial Officer and Director

34

EX-31.1

EXHIBIT 31.1

CERTIFICATION

I, George W. LeMaitre, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of LeMaitre Vascular, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

	/s/ George W. LeMaitre
	George W. LeMaitre
	Chairman and Chief Executive Officer
	(Principal Executive Officer)
Date: August 6, 2019

EX-31.2

EXHIBIT 31.2

CERTIFICATION

I, Joseph P. Pellegrino, Jr., certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of LeMaitre Vascular, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

	/s/ Joseph P. Pellegrino, Jr.
	Joseph P. Pellegrino, Jr.
	Chief Financial Officer and Director
	(Principal Accounting and Financial Officer)
Date: August 6, 2019

EX-32.1

EXHIBIT 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

Pursuant to the requirement set forth in Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended, (the “Exchange Act”), and Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. §1350), George W. LeMaitre, Chairman and Chief Executive Officer of LeMaitre Vascular, Inc. (the “Company”), certifies to the best of his knowledge that:

(1) The Company’s Quarterly Report on Form 10-Q for the period ended June 30, 2019 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

This certification is being provided pursuant to 18 U.S.C. § 1350 and is not deemed to be a part of the Report, nor is it to deemed to be “filed” for any purpose whatsoever.

/s/ George W. LeMaitre

George W. LeMaitre

Chairman and Chief Executive Officer

(Principal Executive Officer)

August 6, 2019

EX-32.2

EXHIBIT 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

Pursuant to the requirement set forth in Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended, (the “Exchange Act”), and Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. §1350), Joseph P. Pellegrino, Jr., Chief Financial Officer of LeMaitre Vascular, Inc. (the “Company”), certifies to the best of his knowledge that:

(1) The Company’s Quarterly Report on Form 10-Q for the period ended June 30, 2019 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

This certification is being provided pursuant to 18 U.S.C. § 1350 and is not deemed to be a part of the Report, nor is it to deemed to be “filed” for any purpose whatsoever.

/s/ Joseph P. Pellegrino, Jr.

Joseph P. Pellegrino, Jr.

Chief Financial Officer and Director

(Principal Accounting and Financial Officer)

August 6, 2019

XML

Document And Entity Information - shares	6 Months Ended
	Jun. 30, 2019	Jul. 31, 2019
Document Information [Line Items]
Entity Registrant Name	LEMAITRE VASCULAR INC
Entity Central Index Key	0001158895
Trading Symbol	lmat
Current Fiscal Year End Date	--12-31
Entity Filer Category	Accelerated Filer
Entity Current Reporting Status	Yes
Entity Emerging Growth Company	false
Entity Small Business	false
Entity Common Stock, Shares Outstanding (in shares)		19,846,966
Entity Shell Company	false
Document Type	10-Q
Document Period End Date	Jun. 30, 2019
Document Fiscal Year Focus	2019
Document Fiscal Period Focus	Q2
Amendment Flag	false
Title of 12(b) Security	Common

XML

Consolidated Balance Sheets (Current Period Unaudited) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Assets
Cash and cash equivalents	$ 13,264	$ 26,318
Short-term marketable securities	34,979	21,668
Accounts receivable, net of allowances of $460 at June 30, 2019 and $399 at December 31, 2018	15,548	15,721
Inventory and other deferred costs	32,243	27,388
Prepaid expenses and other current assets	2,125	2,922
Total current assets	98,159	94,017
Property and equipment, net	14,163	14,102
Right-of-use leased assets	6,428
Goodwill	29,860	29,868
Other intangibles, net	12,632	13,692
Deferred tax assets	1,209	1,215
Other assets	210	194
Total assets	162,661	153,088
Liabilities and stockholders’ equity
Accounts payable	1,427	1,732
Accrued expenses	12,097	15,847
Acquisition-related obligations	2,200	2,179
Lease liabilities - short-term	1,698
Total current liabilities	17,422	19,758
Lease liabilities - long-term	5,152
Deferred tax liabilities	484	484
Other long-term liabilities	2,066	2,611
Total liabilities	25,124	22,853
Stockholders’ equity:
Preferred stock, $0.01 par value; authorized 3,000,000 shares; none outstanding
Common stock, $0.01 par value; authorized 37,000,000 shares; issued 21,250,872 shares at June 30, 2019, and 21,110,224 shares at December 31, 2018	213	211
Additional paid-in capital	100,890	98,442
Retained earnings	50,624	45,831
Accumulated other comprehensive loss	(3,818)	(3,900)
Treasury stock, at cost; 1, 502,519 shares at June 30, 2019 and 1,501,511 shares at December 31, 2018	(10,372)	(10,349)
Total stockholders’ equity	137,537	130,235
Total liabilities and stockholders’ equity	$ 162,661	$ 153,088

XML

Consolidated Balance Sheets (Current Period Unaudited) (Parentheticals) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Accounts receivable, allowances	$ 460	$ 399
Preferred stock, par value (in dollars per share)	$ 0.01	$ 0.01
Preferred stock, shares authorized (in shares)	3,000,000	3,000,000
Preferred stock, shares outstanding (in shares)	0	0
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common stock, shares authorized (in shares)	37,000,000	37,000,000
Common stock, shares issued (in shares)	21,250,872	21,110,224
Treasury stock, at cost (in shares)	1,502,519	1,501,511

XML

Consolidated Statements of Operations (Unaudited) - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Net Sales	$ 29,483	$ 27,020	$ 57,962	$ 53,014
Cost of sales	9,168	8,028	18,183	15,548
Gross profit	20,315	18,992	39,779	37,466
Sales and marketing	7,613	6,792	15,458	13,882
General and administrative	4,531	4,547	9,475	9,244
Research and development	2,256	1,988	4,496	3,813
Gain on divestiture		(5,876)		(5,876)
Total operating expenses	14,400	7,451	29,429	21,063
Income from operations	5,915	11,541	10,350	16,403
Other income (expense):
Interest income	224	165	381	260
Foreign currency gain (loss)	(51)	(159)	(130)	(200)
Income before income taxes	6,088	11,547	10,601	16,463
Provision for income taxes	1,464	2,796	2,464	3,859
Net income	$ 4,624	$ 8,751	$ 8,137	$ 12,604
Earnings per share of common stock:
Basic (in dollars per share)	$ 0.23	$ 0.45	$ 0.41	$ 0.65
Diluted (in dollars per share)	$ 0.23	$ 0.43	$ 0.40	$ 0.62
Weighted-average shares outstanding:
Basic (in shares)	19,680	19,320	19,660	19,301
Diluted (in shares)	20,246	20,260	20,226	20,243
Cash dividends declared per common share (in dollars per share)	$ 0.085	$ 0.07	$ 0.17	$ 0.14

XML

Consolidated Statements of Comprehensive Income (Unaudited) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Net income	$ 4,624	$ 8,751	$ 8,137	$ 12,604
Other comprehensive income (loss):
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

XML

Consolidated Statements of Stockholders' Equity (Unaudited) - USD ($) $ in Thousands	Common Stock [Member]	Additional Paid-in Capital [Member]	Retained Earnings [Member]	AOCI Attributable to Parent [Member]	Treasury Stock [Member]	Total
Balance (in shares) at Dec. 31, 2017	20,745,041				1,480,101
Balance at Dec. 31, 2017	$ 207	$ 93,127	$ 28,333	$ (2,289)	$ (9,608)	$ 109,770
Net income			3,853			3,853
Other comprehensive income				283		283
Issuance of common stock for stock options exercised (in shares)	34,826
Issuance of common stock for stock options exercised	$ 1	292				293
Stock-based compensation expense		621				621
Repurchase of common stock at cost (in shares)
Repurchase of common stock at cost
Common stock dividend accrued			(1,350)			(1,350)
Balance (in shares) at Mar. 31, 2018	20,779,867				1,480,101
Balance at Mar. 31, 2018	$ 208	94,040	30,836	(2,006)	$ (9,608)	113,470
Balance (in shares) at Dec. 31, 2017	20,745,041				1,480,101
Balance at Dec. 31, 2017	$ 207	93,127	28,333	(2,289)	$ (9,608)	109,770
Net income						12,604
Other comprehensive income						(918)
Balance (in shares) at Jun. 30, 2018	20,836,847				1,480,250
Balance at Jun. 30, 2018	$ 208	95,122	38,234	(3,207)	$ (9,613)	120,744
Balance (in shares) at Mar. 31, 2018	20,779,867				1,480,101
Balance at Mar. 31, 2018	$ 208	94,040	30,836	(2,006)	$ (9,608)	113,470
Net income			8,751			8,751
Other comprehensive income				(1,201)		(1,201)
Issuance of common stock for stock options exercised (in shares)	56,215
Issuance of common stock for stock options exercised		446				446
Vested restricted stock units (in shares)	765
Vested restricted stock units
Stock-based compensation expense		636				636
Repurchase of common stock at cost (in shares)					149
Repurchase of common stock at cost					$ (5)	(5)
Common stock dividend accrued			(1,353)			(1,353)
Balance (in shares) at Jun. 30, 2018	20,836,847				1,480,250
Balance at Jun. 30, 2018	$ 208	95,122	38,234	(3,207)	$ (9,613)	120,744
Balance (in shares) at Dec. 31, 2018	21,110,224				1,501,511
Balance at Dec. 31, 2018	$ 211	98,442	45,831	(3,900)	$ (10,349)	130,235
Net income			3,513			3,513
Other comprehensive income				(192)		(192)
Issuance of common stock for stock options exercised (in shares)	61,419
Issuance of common stock for stock options exercised	$ 1	478				479
Vested restricted stock units (in shares)	2,026
Vested restricted stock units
Stock-based compensation expense		746				746
Repurchase of common stock at cost (in shares)					926
Repurchase of common stock at cost					$ (21)	(21)
Common stock dividend accrued			(1,672)			(1,672)
Balance (in shares) at Mar. 31, 2019	21,173,669				1,502,437
Balance at Mar. 31, 2019	$ 212	99,666	47,672	(4,092)	$ (10,370)	133,088
Balance (in shares) at Dec. 31, 2018	21,110,224				1,501,511
Balance at Dec. 31, 2018	$ 211	98,442	45,831	(3,900)	$ (10,349)	130,235
Net income						8,137
Other comprehensive income						82
Balance (in shares) at Jun. 30, 2019	21,250,872				1,503,445
Balance at Jun. 30, 2019	$ 213	100,890	50,624	(3,818)	$ (10,372)	137,537
Balance (in shares) at Mar. 31, 2019	21,173,669				1,502,437
Balance at Mar. 31, 2019	$ 212	99,666	47,672	(4,092)	$ (10,370)	133,088
Net income			4,624			4,624
Other comprehensive income				274		274
Issuance of common stock for stock options exercised (in shares)	77,032
Issuance of common stock for stock options exercised	$ 1	530				531
Vested restricted stock units (in shares)	171
Vested restricted stock units
Stock-based compensation expense		694				694
Repurchase of common stock at cost (in shares)					1,008
Repurchase of common stock at cost					$ (2)	(2)
Common stock dividend accrued			(1,672)			(1,672)
Balance (in shares) at Jun. 30, 2019	21,250,872				1,503,445
Balance at Jun. 30, 2019	$ 213	$ 100,890	$ 50,624	$ (3,818)	$ (10,372)	$ 137,537

XML

Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018
Operating activities
Net income	$ 8,137	$ 12,604
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	2,630	2,102
Stock-based compensation	1,440	1,257
Fair value adjustment to contingent consideration obligations	79	42
Provision for doubtful accounts	219	146
Provision for inventory write-downs	402	170
Gain on divestitures		(5,876)
Foreign currency transaction loss	(63)	96
Changes in operating assets and liabilities:
Accounts receivable	(62)	(552)
Inventory and other deferred costs	(5,288)	(1,306)
Prepaid expenses and other assets	715	26
Accounts payable and other liabilities	(4,094)	(82)
Net cash provided by operating activities	4,115	8,627
Investing activities
Purchases of property and equipment and other assets	(1,651)	(1,230)
Purchases of short-term marketable securities	(13,175)	(10,757)
Proceeds from divestuture		7,400
Net cash used in investing activities	(14,826)	(4,587)
Financing activities
Payments of deferred acquisition consideration	(59)	(1,142)
Proceeds from issuance of common stock	1,008	738
Purchase of treasury stock	(23)	(5)
Common stock cash dividend paid	(3,344)	(2,704)
Net cash provided by financing activities	(2,418)	(3,113)
Effect of exchange rate changes on cash and cash equivalents	75	(385)
Net increase in cash and cash equivalents	(13,054)	542
Cash and cash equivalents at beginning of period	26,318	19,096
Cash and cash equivalents at end of period	$ 13,264	$ 19,638

XML

Note 1 - Organization and Basis for Presentation

6 Months Ended

Jun. 30, 2019

Notes to Financial Statements

Organization, Consolidation and Presentation of Financial Statements Disclosure [Text Block]

1.

Organization and Basis for Presentation

Description of Business

Unless the context requires otherwise, references to LeMaitre Vascular, we, our, and us refer to LeMaitre Vascular, Inc. and our subsidiaries. We develop, manufacture, and market medical devices and implants used primarily in the field of vascular surgery. We also derive revenues from the processing and cryopreservation of human tissues for implantation in patients. We operate in a single segment in which our principal product lines include the following: anastomotic clips, angioscopes, balloon catheters, biologic vascular grafts, biologic vascular patches, carotid shunts, polyester vascular grafts, powered phlebectomy devices, radiopaque marking tape, remote endarterectomy devices, surgical glue and valvulotomes. Our offices are located in Burlington, Massachusetts; Fox River Grove, Illinois; Chandler, Arizona; Vaughan, Canada; Sulzbach, Germany; Milan, Italy; Madrid, Spain; Saint-Etienne, France; North Melbourne, Australia; Tokyo, Japan; Shanghai, China and Singapore.

Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (GAAP) for interim financial information and with the instructions to Form

10

-Q and Article

10

of Regulation S-

X.

Accordingly, they do

not

include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments, consisting only of normal, recurring adjustments considered necessary for a fair presentation of the results of these interim periods have been included. Preparing financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. Actual results

may

differ from these estimates. Our estimates and assumptions, including those related to bad debts, inventories, intangible assets, sales returns and discounts, share-based compensation, and income taxes are updated as appropriate. The results for the

six

months ended

June 30, 2019

are

not

necessarily indicative of results to be expected for the entire year. The information contained in these interim financial statements should be read in conjunction with our audited consolidated financial statements as of and for the year ended

December 

31,

2018,

including the notes thereto, included in our Form

10

-K filed with the Securities and Exchange Commission (SEC) on

March 

11,

2019.

Consolidation

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

Revenue Recognition

Our revenue is derived primarily from the sale of disposable or implantable devices used during vascular surgery. We sell primarily directly to hospitals and to a lesser extent to distributors, as described below, and, during the periods presented in our consolidated financial statements, entered into consigned inventory arrangements with either hospitals or distributors on a limited basis. With the acquisition of the RestoreFlow allograft business, we also derive revenues from the processing and cryopreservation of human tissues for implantation in patients. These revenues are recognized when services have been provided and the tissue has been shipped to the customer, provided all other revenue recognition criteria discussed in the succeeding paragraph have been met.

We recognize revenue under the provisions of ASU

2014

-

09,

Revenue from Contracts with Customers (Topic

606

)

. The core principle of Topic

606

is that an entity should recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The standard explains that to achieve the core principle, an entity should take the following actions:

Step

1:

Identify the contract with a customer

Step

2:

Identify the performance obligations in the contract

Step

3:

Determine the transaction price

Step

4:

Allocate the transaction price

Step

5:

Recognize revenue when or as the entity satisfies a performance obligation

Revenue is recognized when or as a company satisfies a performance obligation by transferring a promised good or service to a customer (which is when the customer obtains control of that good or service). In instances in which shipping and handling activities are performed after a customer takes control of the goods (such as when title passes upon shipment from our dock), we have made the policy election allowed under Topic

606

to account for these activities as fulfillment costs and

not

as performance obligations.

We generally reference customer purchase orders to determine the existence of a contract. Orders that are

not

accompanied by a purchase order are confirmed with the customer either in writing or verbally. The purchase orders or similar correspondence, once accepted, identify the performance obligations as well as the transaction price, and otherwise outline the rights and obligations of each party. We allocate the transaction price of each contract among the performance obligations in accordance with the pricing of each item specified on the purchase order, which is in turn based on standalone selling prices per our published price lists. In cases where we discount products or provide certain items free of charge, we allocate the discount proportionately to all performance obligations, unless it can be demonstrated that the discount should be allocated entirely to

one

or more, but

not

all, of the performance obligations.

We recognize revenue, net of allowances for returns and discounts, fees paid to group purchasing organizations, and any sales and value added taxes required to be invoiced, which we have elected to exclude from the measurement of the transaction price as allowed by the standard, at the time of shipment (taking into consideration contractual shipping terms), or in the case of consigned inventory, when it is consumed. Shipment is the point at which control of the product and title passes to our customers, and at which LeMaitre Vascular has a present right to receive payment for the goods.

Below is a disaggregation of our revenue by major geographic area, which is among the primary categorizations used by management in evaluating financial performance, for the periods indicated (in thousands):  

	Three months ended June 30,				Six months ended June 30,
	2019		2018		2019		2018
	($ in thousands)				($ in thousands)
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

Except as discussed in Note

7,

we do

not

carry any contract assets or contract liabilities, as there are generally

no

unbilled amounts due from customers under contracts for which we have partially satisfied performance obligations, or amounts received from customers for which we have

not

satisfied performance obligations. We satisfy our performance obligations under revenue contracts within a very short time period from receipt of the orders, and payments from customers are typically received within

30

to

60

days of fulfillment of the orders, except in certain geographies such as Spain and Italy where the payment cycle is customarily longer. Accordingly, there is

no

significant financing component to our revenue contracts. Additionally, we have elected as a policy that incremental costs (such as commissions) incurred to obtain contracts are expensed as incurred, due to the short-term nature of the contracts.

Customers returning products

may

be entitled to full or partial credit based on the condition and timing of the return. To be accepted, a returned product must be unopened (if sterile), unadulterated, and undamaged, must have at least

18

months remaining prior to its expiration date, or

twelve

months for our hospital customers in Europe, and generally be returned within

30

days of shipment. These return policies apply to sales to both hospitals and distributors. The amount of products returned to us, either for exchange or credit, has

not

been material. Nevertheless, we provide for an allowance for future sales returns based on historical return experience, which requires judgment. Our cost of replacing defective products has

not

been material and is accounted for at the time of replacement.

Recent Accounting Pronouncements

On

January 1, 2019

we adopted the provisions of ASU

No.

2016

-

02,

Leases (Topic

842

),

subsequently amended by ASU

2018

-

11,

Leases (Topic

842

): Targeted Improvements

. Under the new guidance, we are required to recognize the following for all leases (with the exception of short-term leases) at the commencement date: a lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis; and a right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. As allowed by the standard, we elected to use the transition option

not

to apply the new lease standard to comparative periods but instead to recognize a cumulative-effect adjustment to retained earnings as of the date of adoption,

January 1, 2019.

Upon adoption of this standard, we recognized lease liabilities of

$7.0

million and right-of-use assets in the amount of

$6.5

million (net of the reversal of a previously recorded deferred rent liability of

$0.5

million). There was

no

cumulative-effect adjustment to retained earnings required. Additional disclosures required under the new standard are included in Note

6

to these financial statements.

In

August 2018,

the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (ASU)

2018

-

15,

Intangibles—Goodwill and Other—Internal-Use Software (Subtopic

350

-

40

)

, which aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). The new standard is effective for us beginning

January 

1,

2020,

with early adoption permitted. The adoption of this standard is

not

expected to have a material impact on our financial statements.

In

August 2018,

the FASB issued ASU

2018

-

13

Fair Value Measurement (Topic

820

), which modifies the disclosure requirements for fair value measurements. The new standard is effective for us beginning

January 

1,

2020,

with early adoption permitted. The adoption of this standard is

not

expected to have a material impact on our financial statements.

In

January 2017,

the FASB issued ASU

2017

-

04,

which, among other provisions, eliminates “step

2”

from the goodwill impairment test. The annual, or interim, goodwill impairment test will be performed by comparing the fair value of a reporting unit with its carrying amount. An impairment charge should be recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should

not

exceed the total amount of goodwill allocated to that reporting unit. The new standard is effective for us beginning

January 

1,

2020,

with early adoption permitted. The adoption of this standard is

not

expected to have a material impact on our financial statements.

In

June 2016,

the FASB issued ASU

No.

2016

-

13,

Financial Instruments – Credit Losses (Topic

326

): Measurement of Credit Losses on Financial Instruments (“ASU

2016

-

13”

), which modifies the measurement of expected credit losses of certain financial instruments, including accounts receivable. The new standard is effective for us beginning

January 

1,

2020,

with early adoption permitted. The adoption of this standard is

not

expected to have a material impact on our financial statements.

XML

Note 2 - Income Tax Expense

6 Months Ended

Jun. 30, 2019

Notes to Financial Statements

Income Tax Disclosure [Text Block]

2.

Income Tax Expense

As part of the process of preparing our consolidated financial statements we are required to determine our income taxes in each of the jurisdictions in which we operate. This process involves estimating our actual current tax expense together with assessing temporary differences resulting from recognition of items for income tax and accounting purposes. These differences result in deferred tax assets and liabilities, which are included within our consolidated balance sheet. We must then assess the likelihood that our deferred tax assets will be recovered from taxable income during the carryback period or in the future; and to the extent we believe that recovery is

not

more likely than

not,

we must establish a valuation allowance. To the extent we establish a valuation allowance or increase this allowance in a period, we must reflect this increase as an expense within the tax provision in the statement of operations. We do

not

provide for income taxes on undistributed earnings of foreign subsidiaries, as our intention is to permanently reinvest these earnings.

We recognize, measure, present and disclose in our financial statements any uncertain tax positions that we have taken, or expect to take on a tax return. We operate in multiple taxing jurisdictions, both within and without the United States, and

may

be subject to audits from various tax authorities. Management’s judgment is required in determining our provision for income taxes, our deferred tax assets and liabilities, liabilities for uncertain tax positions, and any valuation allowance recorded against our net deferred tax assets. We will monitor the realizability of our deferred tax assets and adjust the valuation allowance accordingly.

Our policy is to classify interest and penalties related to unrecognized tax benefits as income tax expense. Our

2019

income tax expense varies from the statutory rate mainly due to the generation of federal and state tax credits, permanent items, and different statutory rates from our foreign subsidiaries. Additionally, in the

first

quarter of

2019,

we recognized certain discrete items primarily related to the exercise of stock options. Our

2018

income tax expense varied from the statutory rate mainly due to federal and state tax credits, permanent items, different statutory rates from our foreign entities, and discrete stock option exercises.

We have reviewed the tax positions taken, or to be taken, in our tax returns for all tax years currently open to examination by a taxing authority. As of

June 30, 2019,

the gross amount of unrecognized tax benefits exclusive of interest and penalties was

$753,000.

We remain subject to examination until the statute of limitations expires for each respective tax jurisdiction. The statute of limitations will be open with respect to these tax positions until

2026.

A reconciliation of beginning and ending amount of our unrecognized tax benefits is as follows:

	Six months ended June 30, 2019
	(in thousands)
Unrecognized tax benefits as of December 31, 2018	$	711
Additions for tax positions of current year		37
Additions for tax positions of prior years		5
Reductions for settlements with taxing authorities		-
Reductions for lapses of the applicable statutes of limitations		-
Unrecognized tax benefits as of June 30, 2019	$	753

As of

June 30, 2019,

a summary of the tax years that remain subject to examination in our taxing jurisdictions is as follows:

United States	2015  and forward
Foreign	2012 and forward

XML

Note 3 - Inventories and Other Deferred Costs

6 Months Ended

Jun. 30, 2019

Notes to Financial Statements

Inventory and Other Deferred Costs Disclosure [Text Block]

3.

Inventories and Other Deferred Costs

Inventories and other deferred costs consist of the following:  

	June 30, 2019		December 31, 2018
	(in thousands)
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

We had inventory on consignment of

$1.9

 million and

$1.7

million at

June 30, 2019

and

December 

31,

2018,

respectively.

Other deferred costs relate to our RestoreFlow allograft offering and include costs incurred for the preservation of human vascular tissues available for shipment, tissues currently in active processing, and tissues held in quarantine pending release to implantable status. By federal law, human tissues cannot be bought or sold. Therefore, the vascular tissues we preserve are

not

held as inventory, and the costs we incur to procure and process them are instead accumulated and deferred. These costs include fixed and variable overhead costs associated with the cryopreservation process, including primarily direct labor costs, tissue recovery fees, inbound freight charges, indirect materials and facilities costs. General and administrative expenses and selling expenses associated with the provision of these services are expensed as incurred.

XML

Note 4 - Acquisitions and Divestitures

6 Months Ended

Jun. 30, 2019

Notes to Financial Statements

Business Combination Disclosure [Text Block]

4.

Acquisitions and Divestitures

Our acquisitions are accounted for using the acquisition method, and the acquired companies’ results have been included in the accompanying consolidated financial statements from their respective dates of acquisition. In each case for the acquisitions disclosed below, pro forma information assuming the acquisition had occurred at the beginning of the earliest period presented is

not

included, as the impact is immaterial.

With the exception of Cardial discussed below, our acquisitions have historically been made at prices above the fair value of the acquired identifiable assets, resulting in goodwill, due to expectations of synergies that will be realized by combining businesses. These synergies include the use of our existing sales channel to expand sales of the acquired businesses’ products and services, consolidation of manufacturing facilities, and the leveraging of our existing administrative infrastructure. The fair market valuations associated with these transactions fall within Level 

3

of the fair value hierarchy, due to the use of significant unobservable inputs to determine fair value. The fair value measurements were calculated using unobservable inputs, primarily using the income approach, specifically the discounted cash flow method. The amount and timing of future cash flows within our analysis was based on our due diligence models, most recent operational budgets, long range strategic plans and other estimates. Our assumptions associated with these Level 

3

valuations are discussed below and in Note

13

to these financial statements.

Cardial

On

October 22, 2018,

through a newly created subsidiary LeMaitre Cardial SAS, we entered into an agreement to acquire the business assets of Cardial, a company located in Saint-Etienne, France. The Cardial business consists of the manufacturing of polyester vascular grafts, valvulotomes, surgical glue and original equipment manufacturing (OEM) services. On the same date, the parties entered into a separate agreement under which LeMaitre Cardial SAS purchased the building and land previously owned by Cardial.

The purchase price for the acquired assets, including the land and building, inventory, machinery and equipment, intellectual property, permits and approvals, data and records, and customer and supplier information, was

€2.0

million (

$2.3

million). At closing,

€1.1

million (

$1.3

million) was paid in cash, and

€0.5

million (

$0.5

million) of liabilities were assumed by LeMaitre Cardial SAS. Another

€0.4

million (

$0.4

million) is due in

two

installments, half to be paid

twelve

months after the closing date, and half

eighteen

months after the closing date. There are

no

contingencies associated with these holdback payments, although they

may

be reduced depending upon the results of a reconciliation of the value of inventory transferred, as outlined in the agreement, or for certain post-closing claims. 

The following table summarizes the preliminary purchase price allocation:     

	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

The bargain purchase gain was recorded to reflect the excess of the net assets acquired over the purchase price. We recorded deferred taxes on this gain of

€0.5

million (

$0.6

million), resulting in a net gain of

€1.4

million (

$1.6

million).

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

	Allocated Fair Value		Weighted Average Useful Life
	(in thousands)		(in years)
Customer relationships	€	250		16.0
Intellectual property		237		5.0
Non-compete agreement		46		5.0
Tradenames		90		5.0
Total intangible assets	€	623

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

9.4

years.

Applied Medical

On

September 20, 2018,

we entered into an agreement to acquire the assets of the embolectomy catheter business of Applied Medical Resources Corporation (Applied). The acquired business consists of several embolectomy, thrombectomy and irrigation catheter product lines which are sold worldwide (approximately

60%

in the U.S. and

40%

outside the U.S.). On the same date, we entered into a transition services agreement under which Applied will manufacture and supply us with inventory for a period of

twelve

months, unless extended by both parties.

The purchase price for the acquired assets, which included inventory, machinery and equipment, intellectual property, permits and approvals, data and records, and customer and supplier information, was

$14.2

million. Of this amount,

$11

million was paid at closing, with another

$2

million due

12

months following the closing date, and the final

$1.2

million due

24

months following the closing date.   The deferred amounts totaling

$3.2

million were recorded at an acquisition-date fair value of

$3.0

million using a discount rate of

3.75%

to reflect the time value of money between the acquisition date and the payment due dates. There are

no

contingencies associated with these holdback payments, although they

may

be reduced for certain post-closing claims.

The following table summarizes the purchase price allocation:    

	Allocated
	Fair Value
	(in thousands)
Inventory	$	739
Equipment and supplies		416
Intangible assets		6,527
Goodwill		6,361
Purchase price	$	14,043

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

15

years.

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

	Allocated Fair Value		Weighted Average Useful Life
	(in thousands)		(in years)
Customer relationships	$	4,475		16.0
Intellectual property		1,316		7.0
Non-compete agreement		530		5.0
Tradenames		206		7.0
Total intangible assets	$	6,527

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

13.0

years.

Reddick Divestiture

On

April 

5,

2018,

we entered into an agreement to sell the inventory, intellectual property and other assets associated exclusively with our Reddick cholangiogram catheter and Reddick-Saye screw product lines for

$7.4

 million to Specialty Surgical Instrumentation. Concurrent with this divestiture we entered into a transition services agreement under which we will continue to manufacture and supply these products to the buyer for a period of up to

two

years unless extended by both parties, as well as a balloon supply agreement under which we will supply balloons, a component of the cholangiogram catheters, to the buyer for a period of up to

six

years unless extended by both parties. We recorded a gain during the quarter ended

June 30, 2018

in connection with these agreements of

$5.9

 million. The following table summarizes the allocation of consideration received:

	Allocated
	Fair Value
	(in thousands)
Inventory	$	308
Deferred revenue - transition services agreement		1,081
Goodwill		135
Gain on divestiture		5,876
Consideration received	$	7,400

Under the terms of the transition services agreement, we have agreed to manufacture the Reddick products for the buyer at prices at or in some cases below our cost. We allocated a portion of the consideration received to this agreement to reflect it at fair value and recorded it as deferred revenue. As the products are sold to the buyer, we amortize a portion of the deferred revenue to adjust the gross margin on the sale to fair value on a specific identification basis. As of

June 30, 2019,

the remaining unamortized balance was

$0.2

million. Additionally, as the Reddick product lines that were divested constituted a business, we allocated a portion of our goodwill to this divestiture based on the fair value of the business sold in relation to the fair value of the business that will be retained.

Subsequent Event

On

July 12, 2019,

we entered into an agreement with UreSil, LLC, an Illinois limited liability company, to purchase the remaining assets of their Tru-Incise valve cutter business, including distribution rights in the United States, for

$8.0

million. We also entered into a transition services agreement under which UreSil, LLC will continue to manufacture the acquired products for us for a specified time, until we transition the full manufacturing process to our Burlington, Massachusetts facilities.

XML

Note 5 - Goodwill and Other Intangibles

6 Months Ended

Jun. 30, 2019

Notes to Financial Statements

Goodwill and Intangible Assets Disclosure [Text Block]

5.

Goodwill and Other Intangibles

Goodwill consists of the following as of

June 30, 2019:

	(in thousands)
Balance at December 31, 2018	$	29,868
Effects of currency exchange		(8	)
Balance at June 30, 2019	$	29,860

 Other intangible assets consist of the following:

	June 30, 2019						December 31, 2018
	Gross				Net		Gross				Net
	Carrying		Accumulated		Carrying		Carrying		Accumulated		Carrying
	Value		Amortization		Value		Value		Amortization		Value
	(in thousands)
Product technology and intellectual property	$	11,728	$	6,252	$	5,476	$	11,728	$	5,726	$	6,002
Trademarks, tradenames and licenses		2,246		1,626		620		2,246		1,561		685
Customer relationships		10,093		3,920		6,173		10,065		3,806		6,259
Other intangible assets		2,143		1,780		363		2,145		1,399		746
Total identifiable intangible assets	$	26,210	$	13,578	$	12,632	$	26,184	$	12,492	$	13,692

These intangible assets are being amortized over their useful lives ranging from

2

to

16

years. The weighted-average amortization period for these intangibles as of

June 30, 2019

is

9.7

years. Amortization expense is included in general and administrative expense and was as follows for the periods indicated.

	Three months ended June 30,				Six months ended June 30,
	2019		2018		2019		2018
	(in thousands)				(in thousands)
Amortization expense	$	556	$	414	$	1,111	$	832

We estimate that amortization expense for the remainder of

2019

and for each of the

five

succeeding fiscal years will be as follows: 

	Year ended December 31,
	2019		2020		2021		2022		2023		2024
	(in thousands)
Amortization expense	$	1,010	$	1,857	$	1,624	$	1,420	$	1,346	$	1,182

XML

Note 6 - Leases

6 Months Ended

Jun. 30, 2019

Notes to Financial Statements

Lessee, Operating Leases [Text Block]

6.

Leases

We conduct the majority of our operations in leased facilities, all of which are accounted for as operating leases, as they do

not

meet the criteria for finance leases. Our principal worldwide executive, distribution, and manufacturing operations are located at

three

adjacent

27,098

square foot,

27,289

square foot and

15,642

square foot leased facilities, as well as a

fourth

nearby

12,878

square foot leased facility, in Burlington, Massachusetts. Each of our Burlington leases expires in

December 2023.

In addition, our international operations are headquartered at a

16,470

square foot leased facility located in Sulzbach, Germany, including approximately

3,630

square feet added in

2019,

under a lease which expires in

August 2023.

This lease contains

two five

-year renewal options. In addition, we have smaller long-term leased sales, marketing and other facilities located in Arizona, Japan, Canada, Australia, Singapore and China, and short-term leases in Italy, Spain and Fox River Grove, Illinois. Our lease in Canada contains a

five

-year renewal option exercisable in

February 2023.

Our leases in Germany and Australia are subject to periodic rent increases based on increases in the consumer price index as measured each

September

and

May,

respectively, with such increases applicable to the subsequent

twelve

months of lease payments.

None

of our noncancelable lease payments include non-lease components such as maintenance contracts; we generally reimburse the landlord for direct operating costs associated with the leased space. We have

no

subleases, and there are

no

residual value guarantees associated with, or restrictive covenants imposed by, any of our leases. There were

no

assets held under capital leases at

June 30, 2019.

We also lease automobiles under operating leases in the U.S. as well as certain of our international subsidiaries. The terms of these leases are generally

three

years, with older vehicles replaced by newer vehicles from time to time.

As discussed above under Recent Accounting Pronouncements, on

January 1, 2019

we adopted the provisions of ASU

No.

 

2016

-

02,

Leases (Topic

842

),

subsequently amended by ASU

2018

-

11,

Leases (Topic

842

): Targeted Improvements

. Under the new guidance, we are required to recognize the following for all leases (with the exception of short-term leases) at the commencement date: a lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis; and a right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term.

Our most significant judgment involved in determining the amounts to initially record as lease liabilities and right-of-use assets was the estimation of a discount rate; because we have

no

debt we have

no

incremental borrowing rate to reference. We therefore estimated an incremental borrowing rate using quotes from potential lenders as the primary inputs, augmented by other available information. The resulting rate selected was

5.25%.

We determined that it was appropriate to apply this single rate to our portfolio of leases worldwide, as the lease terms and conditions are substantially similar, and because we believe our subsidiaries would be unable to obtain borrowings on their own without a commitment of parent company support.

Additional information with respect to our leases is as follows:

	Three months ended			Six months ended
	June 30, 2019			June 30, 2019
	(in thousands)			(in thousands)
Lease cost
Operating lease cost	$	432		$	854
Short-term lease cost		63			131
Total lease cost	$	495		$	985
Other information
Cash paid for amounts included in the measurement of operating lease liabilities	$	445		$	959
Right-of-use assets obtained in exchange for new operating leae liabilities	$	594		$	810
Weighted average remaining lease term - operating leases (in years)		4.1			4.1
Weighted average discount rate - operating leases (in years)		5.25	%		5.25	%

At

June 30, 2019,

the minimum noncancelable operating lease rental commitments with initial or remaining terms of more than

one

year are as follows:

Remainder of 2019	$	1,080
Year ending December 31,
2020		1,997
2021		1,863
2022		1,522
2023		1,249
Adjustment to net present value as of June 30, 2019		(861	)
Minimum noncancelable lease liability	$	6,850

XML

Note 7 - Accrued Expenses and Other Long-term Liabilities

6 Months Ended

Jun. 30, 2019

Notes to Financial Statements

Accounts Payable, Accrued Liabilities, and Other Liabilities Disclosure, Noncurrent [Text Block]

7.

Accrued Expenses and Other Long-term Liabilities

Accrued expenses consist of the following:

	June 30, 2019		December 31, 2018
	(in thousands)
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

As discussed in Note

4

above, deferred revenue relates to our divestiture of the Reddick product line and an associated transition services agreement that we entered into at the time of the divestiture, under which we agreed to manufacture and sell product to the buyer at prices at or below our cost. We allocated a portion of the consideration received from the divestiture to this transition services agreement to reflect it at fair value and recorded it as deferred revenue. As the products are sold to the buyer, which we expect will occur over approximately the next

three

months, we amortize a portion of the deferred revenue to adjust the gross margin on the sale to fair value on a specific identification basis. The following table summarizes the changes in the deferred revenue balance during the

six

months ended

June 30, 2019:

	June 30, 2019
	(in thousands)
Beginning contract liability balance	$	552
Revenue recognized upon satisfaction of performance obligations in the period		(364	)
Ending balance	$	188

Other long-term liabilities consist of the following:

	June 30, 2019		December 31, 2018
	(in thousands)
Aquisition-related liabilities	$	1,354	$	1,326
Deferred rent		-		530
Income taxes		566		559
Other		146		196
Total	$	2,066	$	2,611

XML

Note 8 - Segment and Enterprise-wide Disclosures

6 Months Ended

Jun. 30, 2019

Notes to Financial Statements

Segment Reporting Disclosure [Text Block]

8.

Segment and Enterprise-Wide Disclosures

Under Accounting Standards Codification Topic

280,

Segment Reporting

, operating segments are defined as components of an enterprise for which separate, discrete financial information is available and evaluated by the chief operating decision-maker in making decisions on how to allocate resources and assess performance. We view our operations and manage our business as

one

operating segment.

No

discrete operating information is prepared by us except for sales by product line and by legal entity for local reporting purposes.

Most of our revenues are generated in the United States, Germany, and other European countries as well as in Canada, Japan and China. Substantially all of our assets are located in the United States. Net sales to unaffiliated customers by country were as follows:

	Three months ended				Six months ended
	June 30,				June 30,
	2019		2018		2019		2018
	(in thousands)				(in thousands)
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

XML

Note 9 - Share-based Compensation

6 Months Ended

Jun. 30, 2019

Notes to Financial Statements

Share-based Payment Arrangement [Text Block]

9.

Share-based Compensation

Our Third Amended and Restated

2006

Stock Option and Incentive Plan allows for granting of incentive stock options, non-qualified stock options, stock appreciation rights, restricted stock units, unrestricted stock awards and deferred stock awards to our officers, employees, directors and consultants. The components of share-based compensation expense were as follows:

	Three months ended				Six months ended
	June 30,				June 30,
	2019		2018		2019		2018
	(in thousands)				(in thousands)
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 is included in our statements of operations as follows:

	Three months ended June 30,				Six months ended June 30,
	2019		2018		2019		2018
	(in thousands)				(in thousands)
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 stock-based compensation	$	694	$	636	$	1,440	$	1,257

We did

not

grant any options during the

six

-month periods ended

June 30, 2019

or

2018.

Awards of restricted stock units during both periods were immaterial.

We issued approximately

141,000

and

92,000

shares of common stock following the exercise or vesting of underlying stock options or restricted stock units during the

six

months ended

June 30, 2019

and

2018,

respectively.

XML

Note 10 - Net Income Per Share

6 Months Ended

Jun. 30, 2019

Notes to Financial Statements

Earnings Per Share [Text Block]

10.

Net Income per Share

The computation of basic and diluted net income per share was as follows: 

	Three months ended				Six months ended
	June 30,				June 30,
	2019		2018		2019		2018
	(in thousands, except per share data)				(in thousands, except per share data)
Basic:
Net income available for common stockholders	$	4,624	$	8,751	$	8,137	$	12,604
Weighted average shares outstanding		19,680		19,320		19,660		19,301
Basic earnings per share	$	0.23	$	0.45	$	0.41	$	0.65
Diluted:
Net income available for common stockholders	$	4,624	$	8,751	$	8,137	$	12,604
Weighted-average shares outstanding		19,680		19,320		19,660		19,301
Common stock equivalents, if dilutive		566		940		566		942
Shares used in computing diluted earnings per common share		20,246		20,260		20,226		20,243
Diluted earnings per share	$	0.23	$	0.43	$	0.40	$	0.62
Shares excluded in computing diluted earnings per share as those shares would be anti-dilutive		531		214		537		214

XML

Note 11 - Stockholders' Equity

6 Months Ended

Jun. 30, 2019

Notes to Financial Statements

Stockholders' Equity Note Disclosure [Text Block]

11.

Stockholders’ Equity

Share Repurchase Program

On

February 14, 2019,

our Board of Directors authorized the repurchase of up to

$10.0

million of the Company’s common stock through transactions on the open market, in privately negotiated purchases or otherwise. The repurchase program

may

be suspended or discontinued at any time and will conclude on

February 14, 2020,

unless extended by the Board. To date we have

not

made any repurchases under this program.

Dividends

In

February 2011,

our Board of Directors approved a policy for the payment of quarterly cash dividends on our common stock. Future declarations of quarterly dividends and the establishment of future record and payment dates are subject to approval by our Board of Directors on a quarterly basis. The dividend activity for the periods presented is as follows:

Record Date	Payment Date	Per Share Amount		Dividend Payment
				(in thousands)
Fiscal Year 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

,

our Board of Directors approved a quarterly cash dividend on our common stock of

$0.085

per share payable on

September 5, 2019

,

to stockholders of record at the close of business on

August 21, 2019

,

which will total approximately

$1.7

million.

XML

Note 12 - Supplemental Cash Flow Information

6 Months Ended

Jun. 30, 2019

Notes to Financial Statements

Cash Flow, Supplemental Disclosures [Text Block]

12.

Supplemental Cash Flow Information

	Six Months Ended
	June 30.
	2019		2018
	(in thousands)
Cash paid for income taxes, net	$	4,157	$	3,140

XML

Note 13 - Fair Value Measurements

6 Months Ended

Jun. 30, 2019

Notes to Financial Statements

Fair Value Disclosures [Text Block]

13.

Fair Value Measurements

The fair value accounting guidance requires that assets and liabilities carried at fair value be classified and disclosed in

one

of the following

three

categories:

• Level  1 — Quoted prices in active markets for identical assets or liabilities.

• Level  2 — Observable inputs other than quoted prices included in Level  1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

• Level  3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. This includes certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs.

Level 

1

assets being measured at fair value on a recurring basis as of

June 30, 2019

included our short-term investment mutual fund account.

We had

no

Level 

2

assets being measured at fair value on a recurring basis as of

June 30, 2019.

Several of our assets and liabilities related to prior acquisitions were measured using Level

3

techniques. During

2016,

we recorded contingent liabilities associated with our acquisitions of the RestoreFlow allograft and ProCol biologic graft businesses. In the case of the RestoreFlow allograft acquisition, the agreement included the potential for us to pay up to

$5.1

million of additional consideration, with

$1.1

million contingent on the continued employment by LeMaitre Vascular of certain retained employees, and another

$4.0

million contingent on the achievement of specified levels of revenues in the

first

12

and

24

months following the acquisition date. This additional consideration was initially valued in total at

$1.0

million and was being re-measured each reporting period until the payment requirement ended, with any adjustments reported in income from operations. The

first

portion related to continued employment by LeMaitre Vascular of retained individuals was paid during

2018.

The amounts attributable to achieving specified levels of revenue following the acquisition date were

not

paid as the associated revenue metrics were

not

achieved. In the case of ProCol, additional consideration was payable to the former shareholders for a

three

-year period following the closing, calculated at

10%

of ProCol revenues. This additional consideration was initially valued at

$0.3

million and was being re-measured each reporting period until the payment requirement ended, with any adjustments reported in income from operations. The following table provides a rollforward of the fair value of these liabilities, as determined by Level

3

unobservable inputs including management’s forecast of future revenues for these acquired businesses, as well as, in the case of the RestoreFlow allograft acquisition, management’s estimate of the likelihood of continued employment of certain retained employees.

	Six months ended June 30,
	2019			2018
	(in thousands)
Beginning balance	$	72		$	1,300
Additions		-			-
Payments		(59	)		(1,142	)
Change in fair value included in earnings		(13	)		42
Ending balance	$	-		$	200

XML

Note 14 - Accumulated Other Comprehensive Loss

6 Months Ended

Jun. 30, 2019

Notes to Financial Statements

Comprehensive Income (Loss) Note [Text Block]

14.

Accumulated Other Comprehensive Loss

Changes to our accumulated other comprehensive loss consisted primarily of foreign currency translation for the

six

months ended

June 30, 2019

and

2018

were as follows:

	Six months ended
	June 30,
	2019			2018
	(in thousands)
Beginning balance	$	(3,900	)	$	(2,289	)
Other comprehensive income (loss) before reclassifications		82			(918	)
Amounts reclassified from accumulated other comprehensive loss		-			-
Ending Balance	$	(3,818	)	$	(3,207	)

XML

Significant Accounting Policies (Policies)

6 Months Ended

Jun. 30, 2019

Accounting Policies [Abstract]

Basis of Accounting, Policy [Policy Text Block]

Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (GAAP) for interim financial information and with the instructions to Form

10

-Q and Article

10

of Regulation S-

X.

Accordingly, they do

not

include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments, consisting only of normal, recurring adjustments considered necessary for a fair presentation of the results of these interim periods have been included. Preparing financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. Actual results

may

differ from these estimates. Our estimates and assumptions, including those related to bad debts, inventories, intangible assets, sales returns and discounts, share-based compensation, and income taxes are updated as appropriate. The results for the

six

months ended

June 30, 2019

are

not

necessarily indicative of results to be expected for the entire year. The information contained in these interim financial statements should be read in conjunction with our audited consolidated financial statements as of and for the year ended

December 

31,

2018,

including the notes thereto, included in our Form

10

-K filed with the Securities and Exchange Commission (SEC) on

March 

11,

2019.

Consolidation, Policy [Policy Text Block]

Consolidation

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

Revenue from Contract with Customer [Policy Text Block]

Revenue Recognition

Our revenue is derived primarily from the sale of disposable or implantable devices used during vascular surgery. We sell primarily directly to hospitals and to a lesser extent to distributors, as described below, and, during the periods presented in our consolidated financial statements, entered into consigned inventory arrangements with either hospitals or distributors on a limited basis. With the acquisition of the RestoreFlow allograft business, we also derive revenues from the processing and cryopreservation of human tissues for implantation in patients. These revenues are recognized when services have been provided and the tissue has been shipped to the customer, provided all other revenue recognition criteria discussed in the succeeding paragraph have been met.

We recognize revenue under the provisions of ASU

2014

-

09,

Revenue from Contracts with Customers (Topic

606

)

. The core principle of Topic

606

is that an entity should recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The standard explains that to achieve the core principle, an entity should take the following actions:

Step

1:

Identify the contract with a customer

Step

2:

Identify the performance obligations in the contract

Step

3:

Determine the transaction price

Step

4:

Allocate the transaction price

Step

5:

Recognize revenue when or as the entity satisfies a performance obligation

Revenue is recognized when or as a company satisfies a performance obligation by transferring a promised good or service to a customer (which is when the customer obtains control of that good or service). In instances in which shipping and handling activities are performed after a customer takes control of the goods (such as when title passes upon shipment from our dock), we have made the policy election allowed under Topic

606

to account for these activities as fulfillment costs and

not

as performance obligations.

We generally reference customer purchase orders to determine the existence of a contract. Orders that are

not

accompanied by a purchase order are confirmed with the customer either in writing or verbally. The purchase orders or similar correspondence, once accepted, identify the performance obligations as well as the transaction price, and otherwise outline the rights and obligations of each party. We allocate the transaction price of each contract among the performance obligations in accordance with the pricing of each item specified on the purchase order, which is in turn based on standalone selling prices per our published price lists. In cases where we discount products or provide certain items free of charge, we allocate the discount proportionately to all performance obligations, unless it can be demonstrated that the discount should be allocated entirely to

one

or more, but

not

all, of the performance obligations.

We recognize revenue, net of allowances for returns and discounts, fees paid to group purchasing organizations, and any sales and value added taxes required to be invoiced, which we have elected to exclude from the measurement of the transaction price as allowed by the standard, at the time of shipment (taking into consideration contractual shipping terms), or in the case of consigned inventory, when it is consumed. Shipment is the point at which control of the product and title passes to our customers, and at which LeMaitre Vascular has a present right to receive payment for the goods.

Below is a disaggregation of our revenue by major geographic area, which is among the primary categorizations used by management in evaluating financial performance, for the periods indicated (in thousands):  

	Three months ended June 30,				Six months ended June 30,
	2019		2018		2019		2018
	($ in thousands)				($ in thousands)
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

Except as discussed in Note

7,

we do

not

carry any contract assets or contract liabilities, as there are generally

no

unbilled amounts due from customers under contracts for which we have partially satisfied performance obligations, or amounts received from customers for which we have

not

satisfied performance obligations. We satisfy our performance obligations under revenue contracts within a very short time period from receipt of the orders, and payments from customers are typically received within

30

to

60

days of fulfillment of the orders, except in certain geographies such as Spain and Italy where the payment cycle is customarily longer. Accordingly, there is

no

significant financing component to our revenue contracts. Additionally, we have elected as a policy that incremental costs (such as commissions) incurred to obtain contracts are expensed as incurred, due to the short-term nature of the contracts.

Customers returning products

may

be entitled to full or partial credit based on the condition and timing of the return. To be accepted, a returned product must be unopened (if sterile), unadulterated, and undamaged, must have at least

18

months remaining prior to its expiration date, or

twelve

months for our hospital customers in Europe, and generally be returned within

30

days of shipment. These return policies apply to sales to both hospitals and distributors. The amount of products returned to us, either for exchange or credit, has

not

been material. Nevertheless, we provide for an allowance for future sales returns based on historical return experience, which requires judgment. Our cost of replacing defective products has

not

been material and is accounted for at the time of replacement.

New Accounting Pronouncements, Policy [Policy Text Block]

Recent Accounting Pronouncements

On

January 1, 2019

we adopted the provisions of ASU

No.

 

2016

-

02,

Leases (Topic

842

),

subsequently amended by ASU

2018

-

11,

Leases (Topic

842

): Targeted Improvements

. Under the new guidance, we are required to recognize the following for all leases (with the exception of short-term leases) at the commencement date: a lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis; and a right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. As allowed by the standard, we elected to use the transition option

not

to apply the new lease standard to comparative periods but instead to recognize a cumulative-effect adjustment to retained earnings as of the date of adoption,

January 1, 2019.

Upon adoption of this standard, we recognized lease liabilities of

$7.0

million and right-of-use assets in the amount of

$6.5

million (net of the reversal of a previously recorded deferred rent liability of

$0.5

million). There was

no

cumulative-effect adjustment to retained earnings required. Additional disclosures required under the new standard are included in Note

6

to these financial statements.

In

August 2018,

the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (ASU)

2018

-

15,

Intangibles—Goodwill and Other—Internal-Use Software (Subtopic

350

-

40

)

, which aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). The new standard is effective for us beginning

January 

1,

2020,

with early adoption permitted. The adoption of this standard is

not

expected to have a material impact on our financial statements.

In

August 2018,

the FASB issued ASU

2018

-

13

Fair Value Measurement (Topic

820

), which modifies the disclosure requirements for fair value measurements. The new standard is effective for us beginning

January 

1,

2020,

with early adoption permitted. The adoption of this standard is

not

expected to have a material impact on our financial statements.

In

January 2017,

the FASB issued ASU

2017

-

04,

which, among other provisions, eliminates “step

2”

from the goodwill impairment test. The annual, or interim, goodwill impairment test will be performed by comparing the fair value of a reporting unit with its carrying amount. An impairment charge should be recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should

not

exceed the total amount of goodwill allocated to that reporting unit. The new standard is effective for us beginning

January 

1,

2020,

with early adoption permitted. The adoption of this standard is

not

expected to have a material impact on our financial statements.

In

June 2016,

the FASB issued ASU

No.

2016

-

13,

Financial Instruments – Credit Losses (Topic

326

): Measurement of Credit Losses on Financial Instruments (“ASU

2016

-

13”

), which modifies the measurement of expected credit losses of certain financial instruments, including accounts receivable. The new standard is effective for us beginning

January 

1,

2020,

with early adoption permitted. The adoption of this standard is

not

expected to have a material impact on our financial statements.

XML

Note 1 - Organization and Basis for Presentation (Tables)

6 Months Ended

Jun. 30, 2019

Notes Tables

Disaggregation of Revenue [Table Text Block]

	Three months ended June 30,				Six months ended June 30,
	2019		2018		2019		2018
	($ in thousands)				($ in thousands)
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

XML

Note 2 - Income Tax Expense (Tables)

6 Months Ended

Jun. 30, 2019

Notes Tables

Schedule of Unrecognized Tax Benefits Roll Forward [Table Text Block]

	Six months ended June 30, 2019
	(in thousands)
Unrecognized tax benefits as of December 31, 2018	$	711
Additions for tax positions of current year		37
Additions for tax positions of prior years		5
Reductions for settlements with taxing authorities		-
Reductions for lapses of the applicable statutes of limitations		-
Unrecognized tax benefits as of June 30, 2019	$	753

XML

Note 3 - Inventories and Other Deferred Costs (Tables)

6 Months Ended

Jun. 30, 2019

Notes Tables

Schedule of Inventory, Current [Table Text Block]

	June 30, 2019		December 31, 2018
	(in thousands)
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

XML

Note 4 - Acquisitions and Divestitures (Tables)

6 Months Ended

Jun. 30, 2019

Notes Tables

Schedule of Recognized Identified Assets Acquired and Liabilities Assumed [Table Text Block]

	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

	Allocated
	Fair Value
	(in thousands)
Inventory	$	739
Equipment and supplies		416
Intangible assets		6,527
Goodwill		6,361
Purchase price	$	14,043

Schedule of Finite-Lived Intangible Assets Acquired as Part of Business Combination [Table Text Block]

	Allocated Fair Value		Weighted Average Useful Life
	(in thousands)		(in years)
Customer relationships	€	250		16.0
Intellectual property		237		5.0
Non-compete agreement		46		5.0
Tradenames		90		5.0
Total intangible assets	€	623

	Allocated Fair Value		Weighted Average Useful Life
	(in thousands)		(in years)
Customer relationships	$	4,475		16.0
Intellectual property		1,316		7.0
Non-compete agreement		530		5.0
Tradenames		206		7.0
Total intangible assets	$	6,527

Disposal Groups, Including Discontinued Operations [Table Text Block]

	Allocated
	Fair Value
	(in thousands)
Inventory	$	308
Deferred revenue - transition services agreement		1,081
Goodwill		135
Gain on divestiture		5,876
Consideration received	$	7,400

XML

Note 5 - Goodwill and Other Intangibles (Tables)

6 Months Ended

Jun. 30, 2019

Notes Tables

Schedule of Goodwill [Table Text Block]

	(in thousands)
Balance at December 31, 2018	$	29,868
Effects of currency exchange		(8	)
Balance at June 30, 2019	$	29,860

Schedule of Finite-Lived Intangible Assets [Table Text Block]

	June 30, 2019						December 31, 2018
	Gross				Net		Gross				Net
	Carrying		Accumulated		Carrying		Carrying		Accumulated		Carrying
	Value		Amortization		Value		Value		Amortization		Value
	(in thousands)
Product technology and intellectual property	$	11,728	$	6,252	$	5,476	$	11,728	$	5,726	$	6,002
Trademarks, tradenames and licenses		2,246		1,626		620		2,246		1,561		685
Customer relationships		10,093		3,920		6,173		10,065		3,806		6,259
Other intangible assets		2,143		1,780		363		2,145		1,399		746
Total identifiable intangible assets	$	26,210	$	13,578	$	12,632	$	26,184	$	12,492	$	13,692

Finite-lived Intangible Assets Amortization Expense [Table Text Block]

	Three months ended June 30,				Six months ended June 30,
	2019		2018		2019		2018
	(in thousands)				(in thousands)
Amortization expense	$	556	$	414	$	1,111	$	832

Schedule of Finite-Lived Intangible Assets, Future Amortization Expense [Table Text Block]

	Year ended December 31,
	2019		2020		2021		2022		2023		2024
	(in thousands)
Amortization expense	$	1,010	$	1,857	$	1,624	$	1,420	$	1,346	$	1,182

XML

Note 6 - Leases (Tables)

6 Months Ended

Jun. 30, 2019

Notes Tables

Lease, Cost [Table Text Block]

	Three months ended			Six months ended
	June 30, 2019			June 30, 2019
	(in thousands)			(in thousands)
Lease cost
Operating lease cost	$	432		$	854
Short-term lease cost		63			131
Total lease cost	$	495		$	985
Other information
Cash paid for amounts included in the measurement of operating lease liabilities	$	445		$	959
Right-of-use assets obtained in exchange for new operating leae liabilities	$	594		$	810
Weighted average remaining lease term - operating leases (in years)		4.1			4.1
Weighted average discount rate - operating leases (in years)		5.25	%		5.25	%

Schedule of Future Minimum Rental Payments for Operating Leases [Table Text Block]

Remainder of 2019	$	1,080
Year ending December 31,
2020		1,997
2021		1,863
2022		1,522
2023		1,249
Adjustment to net present value as of June 30, 2019		(861	)
Minimum noncancelable lease liability	$	6,850

XML

Note 7 - Accrued Expenses and Other Long-term Liabilities (Tables)

6 Months Ended

Jun. 30, 2019

Notes Tables

Schedule of Accrued Liabilities [Table Text Block]

	June 30, 2019		December 31, 2018
	(in thousands)
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

Contract with Customer, Asset and Liability [Table Text Block]

	June 30, 2019
	(in thousands)
Beginning contract liability balance	$	552
Revenue recognized upon satisfaction of performance obligations in the period		(364	)
Ending balance	$	188

Other Noncurrent Liabilities [Table Text Block]

	June 30, 2019		December 31, 2018
	(in thousands)
Aquisition-related liabilities	$	1,354	$	1,326
Deferred rent		-		530
Income taxes		566		559
Other		146		196
Total	$	2,066	$	2,611

XML

Note 8 - Segment and Enterprise-wide Disclosures (Tables)

6 Months Ended

Jun. 30, 2019

Notes Tables

Schedule of Revenue from External Customers Attributed to Foreign Countries by Geographic Area [Table Text Block]

	Three months ended				Six months ended
	June 30,				June 30,
	2019		2018		2019		2018
	(in thousands)				(in thousands)
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

XML

Note 9 - Share-based Compensation (Tables)

6 Months Ended

Jun. 30, 2019

Notes Tables

Share-based Payment Arrangement, Cost by Plan [Table Text Block]

	Three months ended				Six months ended
	June 30,				June 30,
	2019		2018		2019		2018
	(in thousands)				(in thousands)
Stock option awards	$	432	$	391	$	879	$	780
Restricted stock units		262		245		561		477
Total share-based compensation	$	694	$	636	$	1,440	$	1,257

Share-based Payment Arrangement, Expensed and Capitalized, Amount [Table Text Block]

	Three months ended June 30,				Six months ended June 30,
	2019		2018		2019		2018
	(in thousands)				(in thousands)
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 stock-based compensation	$	694	$	636	$	1,440	$	1,257

XML

Note 10 - Net Income Per Share (Tables)

6 Months Ended

Jun. 30, 2019

Notes Tables

Schedule of Earnings Per Share, Basic and Diluted [Table Text Block]

	Three months ended				Six months ended
	June 30,				June 30,
	2019		2018		2019		2018
	(in thousands, except per share data)				(in thousands, except per share data)
Basic:
Net income available for common stockholders	$	4,624	$	8,751	$	8,137	$	12,604
Weighted average shares outstanding		19,680		19,320		19,660		19,301
Basic earnings per share	$	0.23	$	0.45	$	0.41	$	0.65
Diluted:
Net income available for common stockholders	$	4,624	$	8,751	$	8,137	$	12,604
Weighted-average shares outstanding		19,680		19,320		19,660		19,301
Common stock equivalents, if dilutive		566		940		566		942
Shares used in computing diluted earnings per common share		20,246		20,260		20,226		20,243
Diluted earnings per share	$	0.23	$	0.43	$	0.40	$	0.62
Shares excluded in computing diluted earnings per share as those shares would be anti-dilutive		531		214		537		214

XML

Note 11 - Stockholders' Equity (Tables)

6 Months Ended

Jun. 30, 2019

Notes Tables

Schedule of Dividends Payable [Table Text Block]

Record Date	Payment Date	Per Share Amount		Dividend Payment
				(in thousands)
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

XML

Note 12 - Supplemental Cash Flow Information (Tables)

6 Months Ended

Jun. 30, 2019

Notes Tables

Schedule of Cash Flow, Supplemental Disclosures [Table Text Block]

	Six Months Ended
	June 30.
	2019		2018
	(in thousands)
Cash paid for income taxes, net	$	4,157	$	3,140

XML

Note 13 - Fair Value Measurements (Tables)

6 Months Ended

Jun. 30, 2019

Notes Tables

Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation [Table Text Block]

	Six months ended June 30,
	2019			2018
	(in thousands)
Beginning balance	$	72		$	1,300
Additions		-			-
Payments		(59	)		(1,142	)
Change in fair value included in earnings		(13	)		42
Ending balance	$	-		$	200

XML

Note 14 - Accumulated Other Comprehensive Loss (Tables)

6 Months Ended

Jun. 30, 2019

Notes Tables

Schedule of Accumulated Other Comprehensive Income (Loss) [Table Text Block]

	Six months ended
	June 30,
	2019			2018
	(in thousands)
Beginning balance	$	(3,900	)	$	(2,289	)
Other comprehensive income (loss) before reclassifications		82			(918	)
Amounts reclassified from accumulated other comprehensive loss		-			-
Ending Balance	$	(3,818	)	$	(3,207	)

XML

Note 1 - Organization and Basis for Presentation (Details Textual) $ in Thousands	6 Months Ended
	Jun. 30, 2019 USD ($)	Jan. 01, 2019 USD ($)	Dec. 31, 2018 USD ($)
Operating Lease, Right-of-Use Asset	$ 6,428
Number of Operating Segments	1
Accounting Standards Update 2016-02 [Member]
Operating Lease, Liability, Total		$ 7,000
Operating Lease, Right-of-Use Asset		6,500
Accrued Rent		$ (500)
Minimum [Member]
Period of Payments Received from Customers	30 days
Maximum [Member]
Period of Payments Received from Customers	60 days

XML

Note 1 - Organization and Basis for Presentation - Disaggregation of Revenue by Major Geographic Area (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Revenue	$ 29,483	$ 27,020	$ 57,962	$ 53,014
Americas [Member]
Revenue	17,511	16,082	33,886	31,942
EMEA [Member]
Revenue	10,014	9,074	20,027	17,829
Asia Pacific [Member]
Revenue	$ 1,958	$ 1,864	$ 4,049	$ 3,243

XML

Note 2 - Income Tax Expense (Details Textual) - USD ($)	6 Months Ended
	Jun. 30, 2019	Dec. 31, 2018
Unrecognized Tax Benefits, Ending Balance	$ 753,000	$ 711,000
Domestic Tax Authority [Member]
Open Tax Year	2015 2016 2017 2018
Foreign Tax Authority [Member]
Open Tax Year	2012 2013 2014 2015 2016 2017 2018

XML

Note 2 - Income Tax Expense - Reconciliation of Beginning and Ending Amount of Unrecognized Tax Benefits (Details)	6 Months Ended
	Jun. 30, 2019 USD ($)
Unrecognized tax benefits as of December 31, 2018	$ 711,000
Additions for tax positions of current year	37,000
Additions for tax positions of prior years	5,000
Reductions for settlements with taxing authorities
Reductions for lapses of the applicable statutes of limitations
Unrecognized tax benefits as of June 30, 2019	$ 753,000

XML

Note 3 - Inventories and Other Deferred Costs (Details Textual) - USD ($) $ in Millions	Jun. 30, 2019	Dec. 31, 2018
Other Inventory, Materials, Supplies and Merchandise under Consignment, Gross	$ 1.9	$ 1.7

XML

Note 3 - Inventories and Other Deferred Costs - Summary of Inventories and Other Deferred Costs (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 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

XML

Note 4 - Acquisitions and Divestitures (Details Textual) € in Millions, $ in Millions						3 Months Ended	6 Months Ended
	Jul. 12, 2019 USD ($)	Oct. 22, 2018 USD ($)	Oct. 22, 2018 EUR (€)	Sep. 20, 2018 USD ($)	Apr. 05, 2018 USD ($)	Jun. 30, 2018 USD ($)	Jun. 30, 2019 USD ($)	Oct. 22, 2018 EUR (€)
Acquired Finite-lived Intangible Assets, Weighted Average Useful Life							9 years 255 days
Reddick Divestiture [Member]
Proceeds from Sale of Productive Assets, Total					$ 7.4
Long-term Purchase Commitment, Period					2 years
Gain (Loss) on Disposition of Assets for Financial Service Operations, Total						$ 5.9
Contract with Customer, Liability, Total							$ 0.2
Cardial [Member]
Business Combination, Consideration Transferred, Total		$ 2.3	€ 2.0
Payments to Acquire Businesses, Gross		1.3	1.1
Business Combination, Consideration Transferred, Liabilities Incurred		0.5	0.5
Business Combination, Deferred Purchase Consideration		0.4						€ 0.4
Deferred Tax Assets, Business Combinations		0.6						€ 0.5
Business Combination, Bargain Purchase, Gain Recognized, Amount		$ 1.6	€ 1.4
Acquired Finite-lived Intangible Assets, Weighted Average Useful Life		9 years 146 days	9 years 146 days
Applied Medical [Member]
Business Combination, Consideration Transferred, Total				$ 14.2
Acquired Finite-lived Intangible Assets, Weighted Average Useful Life				13 years
Business Combination Recognized Identifiable Assets Acquired and Liabilities Assumed Current Assets Deferred Costs				$ 3.2
Acquisition Date Fair Value				$ 3.0
Business Combination ,Fair Value Inputs, Discount Rate				3.75%
Business Acquisition, Purchase Price Allocation, Goodwill Expected Tax Deductible, Period				15 years
Applied Medical [Member] | Closing Date [Member]
Business Combination, Consideration Transferred, Total				$ 11.0
Applied Medical [Member] | 12 Months Following the Closing Date [Member]
Business Combination, Consideration Transferred, Total				2.0
Applied Medical [Member] | 24 Months Following the Closing Date [Member]
Business Combination, Consideration Transferred, Total				$ 1.2
Applied Medical [Member] | UNITED STATES
Percentage of Sales by Major Product Lines				60.00%
Applied Medical [Member] | Foreign [Member]
Percentage of Sales by Major Product Lines				40.00%
Balloon Supply Agreement [Member] | Reddick Divestiture [Member]
Long-term Purchase Commitment, Period					6 years
Tru-Incise Valvulotome [Member] | Subsequent Event [Member]
Business Combination, Consideration Transferred, Total	$ 8.0

XML

Note 4 - Acquisitions and Divestitures - Assets Acquired and Liabilities Assumed (Details) € in Thousands, $ in Thousands	Jun. 30, 2019 USD ($)	Dec. 31, 2018 USD ($)	Oct. 22, 2018 EUR (€)	Sep. 20, 2018 USD ($)
Goodwill | $	$ 29,860	$ 29,868
Cardial [Member]
Inventory | €			€ 2,419
Land and building | €			750
Equipment and supplies | €			94
Intangible assets | €			623
Bargain purchase gain | €			(1,946)
Purchase price | €			€ 1,940
Applied Medical [Member]
Inventory | $				$ 739
Equipment and supplies | $				416
Intangible assets | $				6,527
Purchase price | $				14,043
Goodwill | $				$ 6,361

XML

Note 4 - Acquisitions and Divestitures - Acquired Intangible Assets and Related Estimated Useful Lives (Details) € in Thousands, $ in Thousands			6 Months Ended
	Oct. 22, 2018 EUR (€)	Sep. 20, 2018 USD ($)	Jun. 30, 2019
Weighted average useful life (Year)			9 years 255 days
Cardial [Member]
Allocated fair value | €	€ 623
Weighted average useful life (Year)	9 years 146 days
Cardial [Member] | Customer Relationships [Member]
Allocated fair value | €	€ 250
Weighted average useful life (Year)	16 years
Cardial [Member] | Intellectual Property [Member]
Allocated fair value | €	€ 237
Weighted average useful life (Year)	5 years
Cardial [Member] | Noncompete Agreements [Member]
Allocated fair value | €	€ 46
Weighted average useful life (Year)	5 years
Cardial [Member] | Trade Names [Member]
Allocated fair value | €	€ 90
Weighted average useful life (Year)	5 years
Applied Medical [Member]
Allocated fair value | $		$ 6,527
Weighted average useful life (Year)		13 years
Applied Medical [Member] | Customer Relationships [Member]
Allocated fair value | $		$ 4,475
Weighted average useful life (Year)		16 years
Applied Medical [Member] | Intellectual Property [Member]
Allocated fair value | $		$ 1,316
Weighted average useful life (Year)		7 years
Applied Medical [Member] | Noncompete Agreements [Member]
Allocated fair value | $		$ 530
Weighted average useful life (Year)		5 years
Applied Medical [Member] | Trade Names [Member]
Allocated fair value | $		$ 206
Weighted average useful life (Year)		7 years

XML

Note 4 - Acquisitions and Divestitures - Asset Purchase Agreement (Details) - Reddick Divestiture [Member] $ in Thousands	Apr. 05, 2018 USD ($)
Inventory	$ 308
Deferred revenue - transition services agreement	1,081
Goodwill	135
Gain on divestiture	5,876
Consideration received	$ 7,400

XML

Note 5 - Goodwill and Other Intangibles (Details Textual)	6 Months Ended
	Jun. 30, 2019
Acquired Finite-lived Intangible Assets, Weighted Average Useful Life	9 years 255 days
Minimum [Member]
Finite-Lived Intangible Asset, Useful Life	2 years
Maximum [Member]
Finite-Lived Intangible Asset, Useful Life	16 years

XML

Note 5 - Goodwill and Other Intangibles - Schedule of Goodwill (Details) $ in Thousands	6 Months Ended
	Jun. 30, 2019 USD ($)
Balance at December 31, 2018	$ 29,868
Effects of currency exchange	(8)
Balance at June 30, 2019	$ 29,860

XML

Note 5 - Goodwill and Other Intangibles - Components of Identifiable Intangible Assets (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Gross carrying value	$ 26,210	$ 26,184
Accumulated amortization	13,578	12,492
Net carrying value	12,632	13,692
Product Technology and Intellectual Property [Member]
Gross carrying value	11,728	11,728
Accumulated amortization	6,252	5,726
Net carrying value	5,476	6,002
Trademarks, Tradenames and Licenses [Member]
Gross carrying value	2,246	2,246
Accumulated amortization	1,626	1,561
Net carrying value	620	685
Customer Relationships [Member]
Gross carrying value	10,093	10,065
Accumulated amortization	3,920	3,806
Net carrying value	6,173	6,259
Other Intangible Assets [Member]
Gross carrying value	2,143	2,145
Accumulated amortization	1,780	1,399
Net carrying value	$ 363	$ 746

XML

Note 5 - Goodwill and Other Intangibles - Amortization Expense Included in General and Administrative Expense (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Amortization expense	$ 556	$ 414	$ 1,111	$ 832

XML

Note 5 - Goodwill and Other Intangibles - Estimated Amortization Expense for Each of Five Succeeding Fiscal Years (Details) $ in Thousands	Jun. 30, 2019 USD ($)
2019	$ 1,010
2020	1,857
2021	1,624
2022	1,420
2023	1,346
2023	$ 1,182

XML

Note 6 - Leases (Details Textual) $ in Thousands	Jun. 30, 2019 USD ($) ft²
Capital Leased Assets, Gross, Total | $	$ 0
Lessee, Operating Lease, Discount Rate	5.25%
CANADA
Lessee, Operating Lease, Renewal Term	5 years
Principal Worldwide Executive, Distribution, and Manufacturing Operations Facilities [Member]
Property Subject to or Available for Operating Lease, Number of Units	3
Principal Worldwide Executive, Distribution, and Manufacturing Operations Facility One [Member]
Area of Real Estate Property	27,098
Principal Worldwide Executive, Distribution, and Manufacturing Operations Facility Two [Member]
Area of Real Estate Property	27,289
Principal Worldwide Executive, Distribution, and Manufacturing Operations Facility Three [Member]
Area of Real Estate Property	15,642
Principal Worldwide Executive, Distribution, and Manufacturing Operations Facility Four [Member] | Massachusetts [Member]
Area of Real Estate Property	12,878
International Operations Headquarter Facility [Member] | GERMANY
Area of Real Estate Property	16,470
Additional Area of Real Estate Property Added	3,630
Leased Automobiles [Member]
Lessee, Operating Lease, Term of Contract	3 years

XML

Note 6 - Leases - Additional Lease Information (Details) $ in Thousands	3 Months Ended	6 Months Ended
	Jun. 30, 2019 USD ($)	Jun. 30, 2019 USD ($)
Lease cost
Operating lease cost	$ 432	$ 854
Short-term lease cost	63	131
Total lease cost	495	985
Cash paid for amounts included in the measurement of operating lease liabilities	445	959
Right-of-use assets obtained in exchange for new operating leae liabilities	$ 594	$ 810
Weighted average remaining lease term - operating leases (in years) (Year)	4 years 36 days	4 years 36 days
Weighted average discount rate - operating leases (in years)	5.25%	5.25%

XML

Note 6 - Leases - Minimum Rental Commitments (Details) $ in Thousands	Jun. 30, 2019 USD ($)
Remainder of 2019	$ 1,080
2020	1,997
2021	1,863
2022	1,522
2023	1,249
Adjustment to net present value as of June 30, 2019	(861)
Minimum noncancelable lease liability	$ 6,850

XML

Note 7 - Accrued Expenses and Other Long-term Liabilities - Accrued Expenses (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 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

XML

Note 7 - Accrued Expenses and Other Long-term Liabilities - Deferred Revenue (Details) $ in Thousands	6 Months Ended
	Jun. 30, 2019 USD ($)
Beginning contract liability balance	$ 552
Revenue recognized upon satisfaction of performance obligations in the period	(364)
Ending balance	$ 188

XML

Note 7 - Accrued Expenses and Other Long-term Liabilities - Other Long-term Liabilities (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Aquisition-related liabilities	$ 1,354	$ 1,326
Deferred rent		530
Income taxes	566	559
Other	146	196
Total	$ 2,066	$ 2,611

XML

Note 8 - Segment and Enterprise-wide Disclosures (Details Textual)	6 Months Ended
	Jun. 30, 2019
Number of Operating Segments	1

XML

Note 8 - Segment and Enterprise-wide Disclosures - Net Sales to Unaffiliated Customers by Geography (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Net Sales	$ 29,483	$ 27,020	$ 57,962	$ 53,014
UNITED STATES
Net Sales	16,006	14,864	30,764	29,684
GERMANY
Net Sales	3,192	3,257	6,272	6,364
Other Countries [Member]
Net Sales	$ 10,285	$ 8,899	$ 20,926	$ 16,966

XML

Note 9 - Share-based Compensation (Details Textual) - shares	6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross	0	0
Restricted Stock Units (RSUs) [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period	141,000	92,000

XML

Note 9 - Share-based Compensation - Share-Based Compensation Expense (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Stock-based compensation	$ 694	$ 636	$ 1,440	$ 1,257
Share-based Payment Arrangement, Option [Member]
Stock-based compensation	432	391	879	780
Restricted Stock Units (RSUs) [Member]
Stock-based compensation	$ 262	$ 245	$ 561	$ 477

XML

Note 9 - Share-based Compensation - Schedule of Stock-based Compensation (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Total stock-based compensation	$ 694	$ 636	$ 1,440	$ 1,257
Cost of Sales [Member]
Total stock-based compensation	76	83	158	148
Selling and Marketing Expense [Member]
Total stock-based compensation	146	136	304	273
General and Administrative Expense [Member]
Total stock-based compensation	418	351	837	702
Research and Development Expense [Member]
Total stock-based compensation	$ 54	$ 66	$ 141	$ 134

XML

Note 10 - Net Income per Share - Computation of Basic and Diluted Net Income per Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended				6 Months Ended
	Jun. 30, 2019	Mar. 31, 2019	Jun. 30, 2018	Mar. 31, 2018	Jun. 30, 2019	Jun. 30, 2018
Basic:
Net income	$ 4,624	$ 3,513	$ 8,751	$ 3,853	$ 8,137	$ 12,604
Weighted average shares outstanding (in shares)	19,680		19,320		19,660	19,301
Basic earnings per share (in dollars per share)	$ 0.23		$ 0.45		$ 0.41	$ 0.65
Diluted:
Net income	$ 4,624	$ 3,513	$ 8,751	$ 3,853	$ 8,137	$ 12,604
Weighted average shares outstanding (in shares)	19,680		19,320		19,660	19,301
Common stock equivalents, if dilutive (in shares)	566		940		566	942
Shares used in computing diluted earnings per common share (in shares)	20,246		20,260		20,226	20,243
Diluted earnings per share (in dollars per share)	$ 0.23		$ 0.43		$ 0.40	$ 0.62
Shares excluded in computing diluted earnings per share as those shares would be anti-dilutive (in shares)	531		214		537	214

XML

Note 11 - Stockholders' Equity (Details Textual) - USD ($) $ / shares in Units, $ in Millions		3 Months Ended		6 Months Ended
	Jul. 22, 2019	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018	Feb. 14, 2019
Common Stock, Dividends, Per Share, Declared		$ 0.085	$ 0.07	$ 0.17	$ 0.14
Subsequent Event [Member]
Common Stock, Dividends, Per Share, Declared	$ 0.085
Dividends Payable	$ 1.7
Dividends Payable, Date Declared	Jul. 22, 2019
Dividends Payable, Date to be Paid	Sep. 05, 2019
Dividends Payable, Date of Record	Aug. 21, 2019
Stock Repurchase Program [Member] | Common Stock [Member]
Stock Repurchase Program, Authorized Amount						$ 10.0

XML

Note 11 - Stockholders' Equity - Dividend Activity (Details) - $ / shares	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Per share amount (in dollars per share)	$ 0.085	$ 0.07	$ 0.17	$ 0.14
Quarterly Dividends 1 [Member]
Record date			Apr. 05, 2019	Apr. 05, 2018
Per share amount (in dollars per share)			$ 1,672	$ 1,351
Quarterly Dividends 2 [Member]
Record date			Jun. 05, 2019	Jun. 07, 2018
Per share amount (in dollars per share)			$ 1,672	$ 1,353
Quarterly Dividends 3 [Member]
Record date				Sep. 06, 2018
Per share amount (in dollars per share)				$ 1,369
Quarterly Dividends 4 [Member]
Record date				Dec. 06, 2018
Per share amount (in dollars per share)				$ 1,372

XML

Note 12 - Supplemental Cash Flow Information - Schedule of Supplemental Cash Flow Information (Details) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018
Cash paid for income taxes, net	$ 4,157	$ 3,140

XML

Note 13 - Fair Value Measurements (Details Textual) - USD ($) $ in Thousands	Mar. 18, 2016	Jun. 30, 2019	Nov. 10, 2016
Fair Value, Inputs, Level 2 [Member] | Fair Value, Recurring [Member]
Assets, Fair Value Disclosure		$ 0
Fair Value, Inputs, Level 3 [Member] | Restore Flow Allografts [Member]
Acquisition Date Fair Value			$ 1,000
Fair Value, Inputs, Level 3 [Member] | Restore Flow Allografts [Member] | Earn Out Payment [Member]
Business Combination, Contingent Consideration, Liability, Total			4,000
Fair Value, Inputs, Level 3 [Member] | Restore Flow Allografts [Member] | Non-employee Investors [Member]
Business Combination, Contingent Consideration, Liability, Total			1,100
Fair Value, Inputs, Level 3 [Member] | Restore Flow Allografts [Member] | Maximum [Member]
Business Combination, Contingent Consideration, Liability, Total			$ 5,100
Fair Value, Inputs, Level 3 [Member] | ProCol Biologic Graft [Member]
Business Combination Contingent Consideration Measurement as Percentage of Revenue	10.00%
Business Combination, Provisional Information, Initial Accounting Incomplete, Adjustment, Consideration Transferred	$ 300

XML

Note 13 - Fair Value Measurements - Rollforward of the Fair Value as Determined by Level 3 (Details) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018
Beginning balance	$ 72	$ 1,300
Additions
Payments	(59)	(1,142)
Change in fair value included in earnings	(13)	42
Ending balance		$ 200

XML

Note 14 - Accumulated Other Comprehensive Income Loss - Schedule of Accumulated Other Comprehensive Income (Loss) (Details) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018
Balance	$ 130,235	$ 109,770
Balance	137,537	120,744
AOCI Attributable to Parent [Member]
Balance	(3,900)	(2,289)
Other comprehensive income (loss) before reclassifications	82	(918)
Amounts reclassified from accumulated other comprehensive loss
Balance	$ (3,818)	$ (3,207)