Exactech Q3 Revenue $42.4M; Net Income $2.7M or $0.21 EPS
GAINESVILLE, Fla., Oct 27, 2009 (BUSINESS WIRE) --
Company: Exactech, Inc. (EXAC)
Exactech, Inc. (Nasdaq: EXAC), a developer and producer of bone and joint restoration products for hip, knee, shoulder, spine and biologic materials, announced today that total revenue for the third quarter of 2009 increased 12% to $42.4 million from $37.9 million in the third quarter of 2008. Diluted earnings per share for the quarter was $0.21 based on net income of $2.7 million. This compares with net income of $2.1 million or $0.16 diluted EPS a year ago. Net income for the quarter, excluding pre-tax legal expenses and costs of $845,000 related to the ongoing Department of Justice (DOJ) inquiry, was $3.3 million or $0.25 EPS.
Third Quarter Highlights and Segment Performance
* Net income increased 28% to $2.7 million
* Net income excluding DOJ inquiry costs was $3.3 million or $0.25 EPS
* Hip implant revenue increased 24% to $6.8 million from $5.5 million
* Knee implant revenue increased 4% to $17.3 million from $16.6 million
* Biologic and spine revenue increased 7% to $6.5 million from $6.1 million
* Extremity implant revenue increased 31% to $5.5 million from $4.2 million
* Other products revenue increased 13% to $6.3 million from $5.5 million
Nine Months Highlights and Segment Performance
For the first nine months of 2009 revenue was $129.0 million, an increase of 6% over $121.4 million for the comparable period last year. Net income for the first nine months of 2009 was $7.8 million representing a 2% decrease from the first nine months of 2008. Net income for the nine months, excluding pre-tax legal expenses and costs of $3.4 million related to the ongoing Department of Justice (DOJ) inquiry, was $10.0 million or $0.77 diluted EPS.
First nine month product revenues were as follows:
* Hip implant revenue increased 14% to $20.0 million from $17.5 million
* Knee implant revenue decreased 2% to $54.7 million from $55.6 million
* Biologic and spine revenue increased 5% to $20.5 million from $19.4 million
* Extremity implant revenue increased 38% to $16.4 million from $11.8 million
* Other products revenue increased 2% to $17.4 million from $17.1 million
Exactech Chairman and CEO Bill Petty said, "We are encouraged as we move into the fourth quarter of 2009. Our seasonally slow third quarter produced year over year revenue growth in all segments -- and stellar growth in two of our five reporting segments. In fact, on a sequential basis, revenue in the third quarter exceeded second quarter sales in hips, extremities and other products segments. Our innovative new products such as the new Novation Element(R) hip products, Equinoxe(R) shoulder and LPI Instrumentation are driving growth. We continue to make substantial investments in new product development as we see attractive opportunities ahead of us."
"Hip revenue increased 24% to $6.8 million from $5.5 million in the third quarter of 2008. Another highly successful product segment is our extremity segment, which increased revenue 31% to $5.5 million from $4.2 million in the third quarter. Revenue from our knee implant product lines, our largest segment, increased 4% to $17.3 million from $16.6 million during the third quarter of 2009. Biologic and spine revenue increased 7% to $6.5 million from $6.1 million in the same quarter last year. Our other products segment sales turned around with a healthy growth increase of 13% to $6.3 million from $5.5 million a year ago," Petty said.
Exactech President David Petty said, "U.S. sales increased 15% to $30.2 million in the quarter compared to $26.3 million in the third quarter of 2008. International sales for the third quarter increased 5% to $12.2 million compared to $11.6 million a year ago. International sales represented 29% of total sales compared with 31% in the same quarter last year."
Chief Financial Officer Jody Phillips said, "Gross margin percentage for the quarter improved to 64.0% compared to 63.9% for the comparable quarter last year. Total operating expenses in the quarter were $22.7 million, up 12% from $20.3 million in the comparable quarter last year. General and administrative expenses decreased 6%, sales and marketing expenses increased 13% and research and development expenses increased 41% compared to the third quarter of 2008. We also significantly improved the balance sheet during the quarter reducing our total debt to $17.4 million as of the end of the third quarter compared to $23.2 million at the end of the second quarter."
Looking forward, Exactech increased its revenue targets for 2009 in the range of $171 million to $174 million and now targets diluted earnings per share for the year 2009 in the range of $1.00 to $1.02. For the fourth quarter ending December 31, 2009, the company targets revenue in the range of $42 million to $45 million and diluted earnings per share in the range of $0.22 to $0.24. These EPS target ranges exclude the impact of DOJ inquiry costs. 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 company will hold a conference call on Wednesday, October 28 at 10:00 a.m. Eastern. To participate in the call, dial 1-877-941-1429 any time after 9:50 a.m. Eastern on October 28. International and local callers should dial 1-480-629-9666. 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 webcast of the call will be available at http://viavid.net/dce.aspx?sid=00006BC4. A podcast will be available approximately one hour after the event ends and can be accessed at http://viavid.net/mp3/00006BC4.mp3. Both will be archived for approximately 90 days.
The financial statements follow.
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 and Australia, in addition to more than 30 markets in Europe, Asia and Latin America. 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 http://www.hawkassociates.com.
An investment profile on Exactech may be found at http://www.hawkassociates.com/profile/exac.cfm.
Investors may contact Chief Financial Officer Jody Phillips at 352-377-1140 or Julie Marshall or Frank Hawkins, Hawk Associates Inc., at 305-451-1888, e-mail: exactech@hawkassociates.com. 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
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
(unaudited) (audited)
September 30, December 31,
2009 2008
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 3,328 $ 3,285
Accounts receivable, net of allowances of $907 and $1,006 31,729 31,750
Prepaid expenses and other assets, net 2,726 2,193
Income taxes receivable 453 359
Inventories 59,107 61,866
Deferred taxes 1,664 1,119
Total current assets 99,007 100,572
PROPERTY AND EQUIPMENT:
Land 1,897 1,231
Machinery and equipment 24,091 21,528
Surgical instruments 44,923 38,012
Furniture and fixtures 2,991 2,746
Facilities 15,537 13,551
Projects in process 772 2,221
Total property and equipment 90,211 79,289
Accumulated depreciation (37,680) (32,950 )
Net property and equipment 52,531 46,339
OTHER ASSETS:
Deferred financing and deposits, net 1,177 1,594
Other investments -- 1,387
Product licenses and designs, net 5,520 3,382
Customer relationships, net 2,040 2,418
Patents and trademarks, net 2,135 2,272
Goodwill 9,850 9,556
Total other assets 20,722 20,609
TOTAL ASSETS $ 172,260 $ 167,520
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 12,140 $ 13,065
Income taxes payable 957 242
Accrued expenses and other liabilities 8,102 7,067
Current portion of long-term debt 1,183 1,415
Total current liabilities 22,382 21,789
LONG-TERM LIABILITIES:
Deferred tax liabilities 2,348 835
Line of credit 10,723 14,802
Long-term debt, net of current portion 5,521 7,610
Other long-term liabilities 546 869
Total long-term liabilities 19,138 24,116
Total liabilities 41,520 45,905
SHAREHOLDERS' EQUITY:
Common stock 128 127
Additional paid-in capital 52,767 51,223
Accumulated other comprehensive loss, net of tax (1,272) (1,019 )
Retained earnings 79,117 71,284
Total shareholders' equity 130,740 121,615
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 172,260 $ 167,520
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,
2009 2008 2009 2008
NET SALES $ 42,363 $ 37,934 $ 128,969 $ 121,420
COST OF GOODS SOLD 15,269 13,708 46,111 44,830
Gross profit 27,094 24,226 82,858 76,590
OPERATING EXPENSES:
Sales and marketing 13,267 11,775 40,942 37,343
General and administrative 4,353 4,630 13,899 12,875
Research and development 2,932 2,086 8,492 7,028
Depreciation and amortization 2,131 1,800 6,643 5,412
Total operating expenses 22,683 20,291 69,976 62,658
INCOME FROM OPERATIONS 4,411 3,935 12,882 13,932
OTHER INCOME (EXPENSE):
Interest income 1 6 11 9
Other income 17 -- 31 485
Interest expense (168 ) (210 ) (555 ) (809 )
Foreign currency exchange gain (loss) 128 (23 ) 136 (75 )
Total other expenses (22 ) (227 ) (377 ) (390 )
INCOME BEFORE INCOME TAXES 4,389 3,708 12,505 13,542
PROVISION FOR INCOME TAXES 1,649 1,571 4,672 5,461
INCOME BEFORE EQUITY IN NET LOSS OF OTHER INVESTMENTS 2,740 2,137 7,833 8,081
EQUITY IN NET LOSS OF OTHER INVESTMENTS -- -- -- (98 )
NET INCOME $ 2,740 $ 2,137 $ 7,833 $ 7,983
BASIC EARNINGS PER SHARE $ 0.21 $ 0.17 $ 0.61 $ 0.65
DILUTED EARNINGS PER SHARE $ 0.21 $ 0.16 $ 0.61 $ 0.63
SHARES - BASIC 12,788 12,672 12,758 12,191
SHARES - DILUTED 12,922 13,158 12,874 12,657
Adjusted net income to exclude the effect of DOJ related expenses:
Net Income $ 2,740 $ 2,137 $ 7,833 $ 7,983
Adjustments for DOJ related expenses:
DOJ related expenses, pre-tax 845 1,205 3,445 2,214
Income tax benefit (321 ) (477 ) (1,309 ) (877 )
524 728 2,136 1,337
Adjusted net income - excluding DOJ related expense $ 3,264 $ 2,865 $ 9,969 $ 9,320
Diluted earnings per share $ 0.21 $ 0.16 $ 0.61 $ 0.63
Adjustment of DOJ related expenses, net 0.04 0.06 0.16 0.11
Adjusted diluted earnings per share $ 0.25 $ 0.22 $ 0.77 $ 0.74
SOURCE: Exactech, Inc.
Exactech, Inc. Jody Phillips, Chief Financial Officer, 352-377-1140 or Hawk Associates Inc. Julie Marshall or Frank Hawkins, 305-451-1888 exactech@hawkassociates.com.
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Company: Exactech, Inc. (EXAC)
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