LeMaitre Vascular, Inc. — FY 2018 Form 10-K
Reporting period: Fiscal year ended December 31, 2018. The filing also provides unaudited fourth-quarter results. LeMaitre develops, manufactures and sells medical devices and human-tissue cryopreservation services for peripheral vascular disease. It operates as one reportable segment and primarily sells directly to hospitals.
Financial performance and liquidity
| Metric | FY 2018 | FY 2017 |
|---|---|---|
| Net sales | $105.6 million | $100.9 million |
| Gross profit / margin | $73.9 million / 70.0% | $70.7 million / 70.1% |
| Operating income | $28.2 million | $21.1 million |
| Net income | $22.9 million | $17.2 million |
| Diluted EPS | $1.13 | $0.86 |
| Cash from operations | $19.5 million | $22.9 million |
- Sales increased 5%; net income increased 34%. Gross margin was nearly unchanged. Reported operating income included $7.5 million of gains related to the Reddick divestiture and Cardial acquisition; excluding those gains, operating income was approximately $20.7 million.
- 2018 quarterly sales were $26.0 million, $27.0 million, $24.2 million and $28.4 million. Fourth-quarter net income was $6.0 million versus $4.3 million in Q4 2017; Q4 included a $1.6 million Cardial bargain-purchase gain.
- Cash and cash equivalents were $26.3 million, with $21.7 million of short-term marketable securities. Current assets were $94.0 million and current liabilities $19.8 million. Total liabilities were $22.9 million; the filing does not show material borrowings or identify debt as a significant funding source.
- Operating cash flow declined about 15%, with higher inventory and receivables contributing to working-capital use. Investing cash outflow was $7.1 million, including acquisitions and capital spending, partly offset by Reddick-sale proceeds. Financing cash outflow was $4.4 million, principally dividends and acquisition-related payments.
Changes, transactions and management outlook
- Growth reflected biologic patches, carotid shunts, catheters and RestoreFlow tissue-preservation services. EMEA sales rose 9% and Asia/Pacific Rim sales 17%; Americas sales increased 2%.
- LeMaitre acquired Applied Medical’s embolectomy catheter business for $14.2 million and Cardial’s vascular graft, valvulotome and surgical-glue business for €2.0 million. It sold the Reddick product lines for $7.4 million, recognizing a $5.9 million gain. The acquired catheter manufacturing transfer was expected to finish in 2019.
- Management expected cash, investments and interest income to cover anticipated requirements for at least 12 months. It anticipated additional China sales, marketing and regulatory expenses in 2019, and planned to complete a clean-room expansion at an estimated cost of $0.8 million.
- No numeric sales or earnings guidance is provided in the supplied filing text. The company declared a quarterly dividend of $0.085 per share for April 2019 and authorized a share-repurchase program of up to $10 million.
Risks, contingencies and unusual items
- Most sales are tied to open vascular procedures, while treatment is shifting toward minimally invasive endovascular procedures. Competition, pricing pressure and the ability to develop or acquire complementary products could affect growth and margins.
- Regulatory transition to the EU Medical Device Regulation and the filing’s then-current Brexit uncertainty could delay CE-mark recognition or constrain sales. The company also depends on regulatory approvals, reimbursement and compliance across multiple jurisdictions.
- Foreign operations generated 44% of sales. Currency movements, supplier concentration, tissue availability, manufacturing disruption and delayed collections—particularly in Italy and Spain—are risks. Management estimated a hypothetical 10% currency-rate movement could change 2018 operating results by approximately $1.9 million.
- The filing reports a former China distributor lawsuit concerning powered phlebectomy sales; management described the amount in controversy as not material. Management stated no pending legal matter was expected to materially affect financial position, results or cash flows.
- Annual results include the $7.5 million combined divestiture/acquisition gain. The 2018 operating cash flow also reflects $4.3 million of inventory growth. Adoption of the new lease standard in 2019 was expected to add approximately $6.1–$6.7 million of assets and $6.6–$7.2 million of liabilities, with no significant income-statement impact expected.
Important facts for investors to verify
- Underlying operating performance excluding the one-time $7.5 million gain, and whether sales growth and margins persist.
- Integration, sales contribution and manufacturing-transfer progress for the Applied Medical and Cardial acquisitions.
- Inventory growth, operating cash conversion and collection trends in Italy and Spain.
- EU MDR and Brexit-related certification status, as well as the timing and cost of regulatory submissions.
- 2019 execution costs, dividend and repurchase decisions, and the balance-sheet effects of lease-accounting adoption.
The filing states that the independent auditor gave an unqualified opinion on the financial statements and internal control over financial reporting; management also assessed those controls as effective at year-end.