EXAC Exactech, Inc. (delisted)

YTD Revenue Up 6% to $175.5M, Net Income $10.8M, EPS $0.79

Exactech, Inc. (Nasdaq: EXAC), a developer and producer of bone and joint restoration products for hip, knee, shoulder, spine and biologic materials, announced today sales of $55.7 million for the third quarter of 2013, a 9% increase over $51.3 million in the third quarter of 2012. Net income was $3.2 million, or $0.23 per diluted share, compared to $2.6 million, or $0.19 per diluted share, in the same quarter a year ago.

Third Quarter Segment Performance

• Knee implant sales increased 2% to $18.6 million
• Extremity implant sales increased 24% to $15.1 million
• Hip implant sales increased 6% to $9.8 million
• Biologic and Spine sales increased 1% to $6.0 million
• Other sales increased 8% to $6.1 million

Nine Months Highlights and Segment Performance

For the first nine months of 2013 revenue was $175.5 million, an increase of 6% over $165.1 million for the comparable period last year. Net income for the first nine months of 2013 increased 22% to $10.8 million, or $0.79 per diluted share compared to $8.9 million, or $0.67 per diluted share for the first nine months of 2012. First nine month product revenues were as follows:

• Knee implant revenue decreased 1% to $60.2 million
• Extremity implant revenue increased 27% to $47.1 million
• Hip implant revenue increased 1% to $30.8 million
• Biologic and spine revenue increased 5% to $18.9 million
• Other products revenue decreased 1% to $18.6 million

Management Comment

Exactech Chairman and CEO Dr. Bill Petty said, “We had a very successful quarter recording improvement in each of our operating segments. This resulted in a strong boost to net income and improved positive cash flow. Business strengthened pretty much across the board and we also benefited from a number of factors including a more favorable Euro exchange rate. New product lines are largely meeting our expectations and we continue to get welcomed favorable feedback from our surgeons and other customers. We also continue to benefit from strong cost controls supported in part by efficiencies from internal manufacturing operations.”

Exactech President David Petty said, “U.S. sales increased 11% to $39.1 million compared with $35.3 million in the third quarter a year ago and international sales increased 4% to $16.6 million. U.S. sales represented 70% of total sales and international sales were 30% of the total. For the first nine months of 2013, U.S. sales rose 10% to $117.9 million compared with $107.3 million in 2012. International sales for the first nine months of 2013 decreased 0.3% to $57.6 million and decreased to 33% of total sales from 35% of total sales for the first nine months of 2012 due to relative weakness in a few specific markets earlier in the year. On a constant currency basis, international sales increased 6% and worldwide sales grew 9% for the third quarter.”

Chief Financial Officer Jody Phillips said, “We continued to make financial progress during the third quarter of 2013 with the 25% increase in net income. Particularly encouraging was the gross margin improvement to 71% of sales, which was a function of higher than expected U.S. sales mix as well as lower costs due to our internal manufacturing operations. The 11% increase in operating expenses was largely in line with our expectations although we are projecting lower increases in operating expenses for the fourth quarter.”

Looking forward, Exactech narrowed its 2013 sales guidance of $237 - $239 million and increased its full year diluted EPS target to $1.09 – $1.11. For the fourth quarter ending December 31, 2013, the company said it anticipates sales of $61.5 - $63.5 million and diluted EPS of $0.30 - $0.32. The foregoing statements regarding targets for the quarter and full year are forward-looking and actual results may differ materially. These are the company’s targets, not predictions of actual performance.

The financial statements are below.

Conference Call

The company has scheduled a conference call at 10:00 a.m. Eastern Time on Wednesday, October 23. The call will cover the company’s third quarter results. CEO Bill Petty will open the conference call and a question-and-answer session will follow.

To participate in the call, dial 1-877-941-2068 any time after 9:50 a.m. Eastern on October 23rd. International and local callers should dial 1-480-629-9712. A live webcast of the call will be available at http://www.hawkassociates.com/profile/exac.cfm or http://public.viavid.com/index.php?id=106302.

This call will be archived for approximately 90 days.

About Exactech

Based in Gainesville, Fla., Exactech develops and markets orthopaedic implant devices, related surgical instruments and biologic materials and services to hospitals and physicians. The company manufactures many of its orthopaedic devices at its Gainesville facility. Exactech’s orthopaedic products are used in the restoration of bones and joints that have deteriorated as a result of injury or diseases such as arthritis. Exactech markets its products in the United States, in addition to more than 30 markets in Europe, Latin America, Asia and the Pacific. Additional information about Exactech, Inc. can be found at http://www.exac.com. Copies of Exactech’s press releases, SEC filings, current price quotes and other valuable information for investors may be found at http://www.exac.com and http://www.hawkassociates.com.

An investment profile on Exactech may be found at http://www.hawkassociates.com/profile/exac.cfm. To receive future releases in e-mail alerts, sign up at http://www.hawkassociates.com/about/alert.

This release contains various forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, which represent the company’s expectations or beliefs concerning future events of the company’s financial performance. These forward-looking statements are further qualified by important factors that could cause actual results to differ materially from those in the forward-looking statements. These factors include the effect of competitive pricing, the company’s dependence on the ability of third party manufacturers to produce components on a basis which is cost-effective to the company, market acceptance of the company’s products and the effects of government regulation. Results actually achieved may differ materially from expected results included in these statements.

 

EXACTECH, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS (in thousands)       (unaudited)   (audited) September 30, December 31,   2013   2012 ASSETS CURRENT ASSETS: Cash and cash equivalents $ 6,779 $ 5,838 Trade receivables, net of allowances of $1,231 and $1,012 56,300 48,073 Prepaid expenses and other assets, net 2,834 2,877 Income taxes receivable 1,489 502 Inventories, current 71,779 70,699 Deferred tax assets   2,621   2,229 Total current assets 141,802 130,218   PROPERTY AND EQUIPMENT: Land 2,213 2,211 Machinery and equipment 34,751 33,158 Surgical instruments 95,091 85,115 Furniture and fixtures 3,840 3,858 Facilities 18,058 18,033 Projects in process   858   643 Total property and equipment 154,811 143,018 Accumulated depreciation   (72,745 )   (61,586 ) Net property and equipment 82,066 81,432   OTHER ASSETS: Deferred financing and deposits, net 915 866 Non-current inventory 11,074 5,410 Product licenses and designs, net 9,841 10,534 Patents and trademarks, net 2,033 2,217 Customer relationships, net 777 1,108 Goodwill   13,435   13,356 Total other assets   38,075   33,491 TOTAL ASSETS $ 261,943 $ 245,141   LIABILITIES AND SHAREHOLDERS’ EQUITY CURRENT LIABILITIES: Accounts payable $ 14,539 $ 14,773 Income taxes payable 472 2,188 Accrued expenses 11,605 11,726 Other current liabilities 250 250 Current portion of long-term debt   3,000   2,625 Total current liabilities 29,866 31,562   LONG-TERM LIABILITIES: Deferred tax liabilities 3,019 3,186 Line of credit 18,386 12,197 Long-term debt, net of current portion 24,000 26,250 Other long-term liabilities   817   1,049 Total long-term liabilities   46,222   42,682 Total liabilities 76,088 74,244   COMMITMENTS AND CONTINGENCIES   SHAREHOLDERS’ EQUITY: Common stock 135 133 Additional paid-in capital 67,848 63,918 Accumulated other comprehensive loss, net of tax (4,548 ) (4,797 ) Retained earnings   122,420   111,643 Total shareholders’ equity   185,855   170,897   TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY $ 261,943 $ 245,141     EXACTECH, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (in thousands, except per share amounts) (Unaudited)         Three Month Periods Nine Month Periods Ended September 30, Ended September 30, 2013   2012 2013   2012 NET SALES $ 55,650 $ 51,270 $ 175,510 $ 165,083   COST OF GOODS SOLD   16,126   15,392   53,791   50,688 Gross profit 39,524 35,878 121,719 114,395   OPERATING EXPENSES: Sales and marketing 20,274 18,713 63,281 60,501 General and administrative 5,384 4,564 15,801 14,947 Research and development 5,068 4,366 13,523 12,630 Depreciation and amortization   3,963   3,722   11,992   11,327 Total operating expenses 34,689 31,365 104,597 99,405         INCOME FROM OPERATIONS 4,835 4,513 17,122 14,990   OTHER INCOME (EXPENSE): Interest income 2 - 5 8 Other income (loss) 18 22 69 57 Interest expense (281 ) (322 ) (852 ) (1,156 ) Foreign currency exchange gain (loss)   271   60   (312 )   194 Total other income (expenses) 10 (240 ) (1,090 ) (897 )         INCOME BEFORE INCOME TAXES 4,845 4,273 16,032 14,093   PROVISION FOR INCOME TAXES 1,653 1,720 5,255 5,232         NET INCOME $ 3,192 $ 2,553 $ 10,777 $ 8,861     BASIC EARNINGS PER SHARE $ 0.24 $ 0.19 $ 0.80 $ 0.67   DILUTED EARNINGS PER SHARE $ 0.23 $ 0.19 $ 0.79 $ 0.67     SHARES - BASIC 13,494 13,278 13,433 13,204   SHARES - DILUTED 13,712 13,358 13,632 13,295  

Exactech, Inc.Investor contacts:Jody Phillips, 352-377-1140Chief Financial OfficerorHawk AssociatesJulie Marshall or Frank Hawkins, 305-451-1888exactech@hawkassociates.com