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Exactech Q3 Revenue Up 8% to $51.3M, Net Income Up 95% to $2.6M, EPS $0.19; YTD Revenue Up 8% to $165.1M, Net Income $8.9M, EPS $0.67

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GAINESVILLE, Fla.--(BUSINESS WIRE)--

Exactech, Inc. (Nasdaq: EXAC), a developer and producer of bone and joint restoration products for hip, knee, shoulder, spine and biologic materials, announced today revenue of $51.3 million for the third quarter of 2012, an 8% increase over $47.3 million in the third quarter of 2011. Net income increased 95% to $2.6 million, or $0.19 per diluted share, compared to $1.3 million, or $0.10 per diluted share, in the same quarter a year ago.

Third Quarter Highlights and Segment Performance

  • Third quarter revenue increased 8% to $51.3 million
  • Net Income increased 95% to $2.6 million
  • Knee implant revenue increased 2% to $18.2 million
  • Extremity implant revenue increased 25% to $12.2 million
  • Hip implant revenue increased 16% to $9.2 million
  • Biologic and Spine revenue increased 10% to $5.9 million
  • Other products revenue decreased 9% to $5.6 million

Nine Months Highlights and Segment Performance

For the first nine months of 2012 revenue was $165.1 million, an increase of 8% over $152.3 million for the comparable period last year. Net income for the first nine months of 2012 increased 27% to $8.9 million, or $0.67 per diluted share compared to $7.0 million, or $0.53 per diluted share for the first nine months of 2011.

  • First nine month revenue increased 8% to $165.1 million
  • Net Income increased 27% to $8.9 million
  • Knee implant revenue increased 1% to $60.7 million
  • Extremity implant revenue increased 29% to $37.2 million
  • Hip implant revenue increased 25% to $30.5 million
  • Biologic and spine revenue decreased 2% to $18.0 million
  • Other products revenue decreased 10% to $18.7 million

Management Comment

Exactech Chairman and CEO Dr. Bill Petty said, “We were pleased with another strong quarter. Again, we outperformed our peer companies as we reported improvements in all major categories of our business led by our extremities and hip segments. We also recorded a welcome improvement in our knee business, our largest operating segment. Growing strength in our spine products line primarily drove a 10% gain in our biologic and spine segment revenue. With a 27% increase in year to date net income, we are now beginning to experience the operating leverage from many of our investments over the last few years.”

Exactech President David Petty said, “Based on strong performances of our hip and extremities businesses as well as sequentially improving U.S. knee growth rates, U.S. sales increased 12% to $35.3 million compared with $31.5 million in the third quarter a year ago. This represented our highest quarterly U.S. growth in more than two years. International sales grew 1% to $16.0 million reflecting sales strength in Asian and Latin American markets, offsetting market challenges in Europe as well as a $1.0 million net sales return that was part of an agreement with our former Spanish distributor to settle outstanding accounts receivable. Including this return, sales growth on a constant currency basis in the quarter was 10% worldwide and 7% internationally.

Chief Financial Officer Jody Phillips said, “Gross margins increased to 70% for the third quarter from 68.5% for the third quarter a year ago due to higher growth in the U.S. market and continued cost reductions attributable to internal manufacturing. Total operating expenses for the quarter increased 4% to $31.4 million and as a percentage of sales decreased to 61% from 64% for the third quarter of 2011. General and administrative expenses decreased 10% in the third quarter to $4.6 million from $5.1 million, primarily due to the reduction in compliance costs. R&D expenses increased 25% to $4.4 million during the third quarter, primarily due to robust design and development activities across all of our product lines.”

Looking forward, Exactech updated its 2012 revenue guidance to $221-$223 million and changed its diluted EPS target to $0.93 - $0.95. For the fourth quarter ending December 31, 2012, the company anticipates revenues of $56-$58 million and diluted EPS of $0.26-$0.28. 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 on Wednesday, October 31, 2012 at 10:00 a.m. Eastern Time. The call will cover the company's third quarter 2012 results. Dr. Petty will open the conference call and a question-and-answer session will follow.

To participate in the call, dial 1-877-941-4774 any time after 9:50 a.m. Eastern on October 31. International and local callers should dial 1-480-629-9760. While in conference, if callers should require operator assistance, they can press the star followed by the zero button. This will call an operator to the line.

A live and archived webcast of the call will be available at http://www.hawkassociates.com/profile/exac.cfm or http://p2.viavid.com/player/index.php?id=102146.

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, compliance costs and the effects of government regulation. Results actually achieved may differ materially from expected results included in these statements.

 
EXACTECH, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
 
  (unaudited)   (audited)
September 30, December 31,
2012 2011
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 3,965 $ 4,663
Accounts receivable, net of allowances of $800 and $3,186 45,201 45,856
Prepaid expenses and other assets, net 3,438 3,948
Income taxes receivable 452 171
Inventories – current 71,288 61,724
Deferred tax assets – current   1,947     2,869  
Total current assets 126,291 119,231
 
PROPERTY AND EQUIPMENT:
Land 2,209 2,209
Machinery and equipment 32,424 30,164
Surgical instruments 84,611 77,105
Furniture and fixtures 3,847 3,753
Facilities 18,008 17,930
Projects in process   1,778     2,141  
Total property and equipment 142,877 133,302
Accumulated depreciation   (63,177 )   (56,061 )
Net property and equipment 79,700 77,241
 
OTHER ASSETS:
Deferred financing and deposits, net 893 1,016
Non-current inventories 8,328 7,334
Product licenses and designs, net 10,555 11,380
Patents and trademarks, net 2,139 1,589
Customer relationships, net 1,211 1,545
Goodwill   13,276     13,276  
Total other assets   36,402     36,140  
TOTAL ASSETS $ 242,393   $ 232,612  
 
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 14,306 $ 12,909
Income taxes payable 1,475 4,210
Accrued expenses and other liabilities 11,432 8,957
Other current liabilities 250 344
Current portion of long-term debt   2,625     648  
Total current liabilities 30,088 27,068
 
LONG-TERM LIABILITIES:
Deferred tax liabilities 2,655 3,520
Line of credit 15,210 42,410
Long-term debt, net of current portion 27,000 3,507
Other long-term liabilities   1,130     780  
Total long-term liabilities   45,995     50,217  
Total liabilities 76,083 77,285
 
SHAREHOLDERS' EQUITY:
Common stock 133 132
Additional paid-in capital 63,564 60,565
Accumulated other comprehensive loss (5,150 ) (4,272 )
Retained earnings   107,763     98,902  
Total shareholders' equity   166,310     155,327  
 
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 242,393   $ 232,612  
 
 
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,
2012 2011 2012 2011
NET SALES $ 51,270 $ 47,278 $ 165,083 $ 152,329
 
COST OF GOODS SOLD   15,392   14,898   50,688   48,156
Gross profit 35,878 32,380 114,395 104,173
 
OPERATING EXPENSES:
Sales and marketing 18,713 18,041 60,501 57,292
General and administrative 4,564 5,070 14,947 16,555
Research and development 4,366 3,502 12,630 9,717
Depreciation and amortization   3,722   3,663   11,327   10,642
Total operating expenses 31,365 30,276 99,405 94,206
       
INCOME FROM OPERATIONS 4,513 2,104 14,990 9,967
 
OTHER INCOME (EXPENSE):
Interest income 8 3
Other income 22 30 57 73
Interest expense (322 ) (281 ) (1,156 ) (821 )
Foreign currency gain (loss)   60   (48 )   194   845
Total other income (expenses) (240 ) (299 ) (897 ) 100
       
INCOME BEFORE INCOME TAXES 4,273 1,805 14,093 10,067
 
PROVISION FOR INCOME TAXES 1,720 494 5,232 2,569
       
NET INCOME $ 2,553 $ 1,311 $ 8,861 $ 7,004
 
 
BASIC EARNINGS PER SHARE $ 0.19 $ 0.10 $ 0.67 $ 0.54
 
DILUTED EARNINGS PER SHARE $ 0.19 $ 0.10 $ 0.67 $ 0.53
 
 
SHARES - BASIC 13,278 13,125 13,204 13,083
 
SHARES - DILUTED 13,358 13,207 13,295 13,215
 

Exactech, Inc.
Investor contacts
Jody Phillips, 352-377-1140
Chief Financial Officer
or
Hawk Associates
Julie Marshall or Frank Hawkins, 305-451-1888
E-mail: exactech@hawkassociates.com

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