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| 8-K - FORM 8-K - EXACTECH INC | d249808d8k.htm |
Exhibit 99.1
Exactech Q3 Revenue Up 13% to $47.3M Driven by Robust
International Growth. Net Income $1.3M or $0.10 EPS.
YTD Revenue Up 10% to $152.3M, Net Income $7.0M, EPS $0.53
GAINESVILLE, Fla. – November 1, 2011 – 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 $47.3 million for the third quarter of 2011, a 13% increase over $42.0 million in the third quarter of 2010. Net income decreased 12% to $1.3 million, or $0.10 per diluted share, compared with $1.5 million, or $0.11 per diluted share, in the same quarter a year ago. Net income for the quarter, excluding Health Care Professional (HCP) compliance expenses of $1.0 million related to the Department of Justice (DOJ) settlement, increased 19% to $1.9 million or $0.15 EPS.
Third Quarter Highlights and Segment Performance
| • | Third quarter revenue increased 13% to $47.3 million |
| • | Knee implant revenue increased 15% to $17.9 million |
| • | Extremity implant revenue increased 34% to $9.8 million |
| • | Hip implant revenue increased 22% to $8.0 million |
| • | Biologic and Spine revenue decreased 15% to $5.4 million |
| • | Other products revenue remained flat at $6.2 million |
Nine Months Highlights and Segment Performance
For the first nine months of 2011 revenue was $152.3 million, an increase of 10% over $138.7 million for the comparable period last year. Net income for the first nine months of 2011 decreased 10% to $7.0 million, or $0.53 per diluted share compared to $7.8 million, or $0.59 per diluted share for the first nine months of 2010. Net income for the nine months, excluding pre-tax HCP compliance expenses of $3.7 million, increased 13% to $9.4 million or $0.71 EPS. First nine month product revenues were as follows:
| • | Knee implant revenue increased 7% to $59.9 million from $55.9 million |
| • | Extremity implant revenue increased 34% to $28.9 million from $21.5 million |
| • | Hip implant revenue increased 19% to $24.4 million from $20.5 million |
| • | Biologic and spine revenue decreased 10% to $18.4 million from $20.5 million |
| • | Other products revenue increased 2% to $20.7 million from $20.3 million |
Management Comment
Exactech Chairman and CEO Bill Petty said, “We continued to improve market share with strong international sales that resulted in better than projected total sales of $47.3 million for the quarter. Sales
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in knee implants, our largest product segment, improved 15% to $17.9 million for the third quarter of 2011 from $15.6 million in the third quarter of 2010. Our fast-growing Equinoxe® shoulder products line continued to significantly outperform the market, with extremity revenues increasing 34% to $9.8 million from last year’s Q3 revenue of $7.3 million. Hip implant sales for the third quarter rose 22% to 8.0 million from $6.6 million in the third quarter of 2010. Biologic-spine revenue decreased more than we expected. It was down 15% to $5.4 million compared with $6.3 million in the same quarter last year. Other product sales remained flat at $6.2 million.”
Exactech President David Petty said, “In the third quarter, international sales grew 56% to $15.8 million and increased to 33% of total sales from 24% of total sales for the third quarter of 2010 as we continued to leverage recent investments in our OUS distribution channels. For the first nine months of the year, international sales increased 29% to $53.3 million from $41.2 million for the same period of 2010. As a percentage of sales, international sales in the first nine months of 2011 increased to 35% from 30% in the first nine months of the prior year. For the quarter, U.S. sales decreased 1% to $31.5 million compared with $31.9 million in the third quarter of 2010. This performance was below our expectations as both knees and hips aligned more with market trends than we expected. For the first nine months of 2011, U.S. sales rose 2% to $99.0 million compared with $97.5 million in 2010.”
Chief Financial Officer Jody Phillips said, “Net income for the quarter was down 12% to $1.3 million from $1.5 million in the same quarter last year. Gross margins increased to 68.5% for the third quarter of 2011 from 67.4% for the third quarter of 2010, primarily due to the increase in international sales in direct markets.
“Total operating expenses for the quarter were $30.3 million, an increase of 20% from $25.2 million in the third quarter of 2010. As a percentage of sales, third quarter operating expenses increased to 64% from 60% for the third quarter of 2010. Total sales and marketing expenses were up 15%, and increased to 38% as a percentage of sales from 37% during 2010, as we continued to incur expansion expenses in our Spanish subsidiary. General and administrative expenses rose 32% in the third quarter to $5.1 million from $3.9 million primarily due to the compliance costs. Research and development expenses increased 17% to $3.5 million from $3.0 million in the third quarter of 2010.”
Looking forward, Exactech updated its 2011 revenue guidance to $204 - $207 million and diluted EPS of $0.74 - $0.76 on a GAAP basis and diluted EPS of $0.96 - $0.98 excluding the impact of the company’s projection of $4.6 million in compliance expenses for 2011. For the fourth quarter ending December 31, 2011, the company said it anticipates revenues of $52 - $55 million and diluted EPS of $0.21 - $0.23 on a GAAP basis and diluted EPS of $0.25 - $0.27 excluding the projected impact of $1.0 million in compliance related expenses. 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
Exactech will hold a conference call with CEO Dr. William Petty and other key members of the management team on Wednesday, November 2, 2011 at 10:00 a.m. Eastern Time. The call will cover the company’s third quarter 2011 results. Dr. Petty will open the conference call and a question-and-answer session will follow.
To participate in the call, dial 1-877-941-8416 any time after 9:50 a.m. EDT on November 2. International and local callers should dial 1-480-629-9808. 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.
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A live and archived webcast of the call will be available at http://www.hawkassociates.com/profile/exac.cfm or at http://viavid.net/dce.aspx?sid=00008E46
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.
| Investor contacts | Julie Marshall or Frank Hawkins | |
| Jody Phillips | Hawk Associates | |
| Chief Financial Officer | 305-451-1888 | |
| 352-377-1140 | E-mail: exactech@hawkassociates.com | |
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EXACTECH, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
| (unaudited) September 30, |
(audited) December 31, |
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| 2011 | 2010 | |||||||
| ASSETS |
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| CURRENT ASSETS: |
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| Cash and cash equivalents |
$ | 3,897 | $ | 3,935 | ||||
| Accounts receivable, net of allowances of $3,010 and $2,751 |
43,094 | 39,796 | ||||||
| Prepaid expenses and other assets, net |
4,899 | 3,384 | ||||||
| Income taxes receivable |
727 | 1,544 | ||||||
| Inventories – current |
62,788 | 61,602 | ||||||
| Deferred tax assets – current |
2,563 | 2,278 | ||||||
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| Total current assets |
117,968 | 112,539 | ||||||
| PROPERTY AND EQUIPMENT: |
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| Land |
2,214 | 2,210 | ||||||
| Machinery and equipment |
30,023 | 27,155 | ||||||
| Surgical instruments |
72,666 | 60,077 | ||||||
| Furniture and fixtures |
3,754 | 3,583 | ||||||
| Facilities |
17,984 | 16,365 | ||||||
| Projects in process |
1,702 | 3,669 | ||||||
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| Total property and equipment |
128,343 | 113,059 | ||||||
| Accumulated depreciation |
(52,955 | ) | (44,377 | ) | ||||
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| Net property and equipment |
75,388 | 68,682 | ||||||
| OTHER ASSETS: |
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| Deferred financing and deposits, net |
472 | 881 | ||||||
| Non-current inventories |
11,866 | 9,191 | ||||||
| Product licenses and designs, net |
11,529 | 11,812 | ||||||
| Patents and trademarks, net |
1,668 | 1,938 | ||||||
| Customer relationships, net |
1,689 | 2,003 | ||||||
| Goodwill |
13,461 | 12,947 | ||||||
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| Total other assets |
40,685 | 38,772 | ||||||
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| TOTAL ASSETS |
$ | 234,041 | $ | 219,993 | ||||
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| LIABILITIES AND SHAREHOLDERS’ EQUITY |
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| CURRENT LIABILITIES: |
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| Accounts payable |
$ | 15,025 | $ | 15,855 | ||||
| Income taxes payable |
614 | — | ||||||
| Accrued expenses and other liabilities |
7,642 | 8,847 | ||||||
| Other current liabilities |
330 | 296 | ||||||
| Current portion of long-term debt |
644 | 1,066 | ||||||
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| Total current liabilities |
24,255 | 26,064 | ||||||
| LONG-TERM LIABILITIES: |
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| Deferred tax liabilities |
6,196 | 6,175 | ||||||
| Line of credit |
44,591 | 37,556 | ||||||
| Long-term debt, net of current portion |
3,669 | 4,153 | ||||||
| Other long-term liabilities |
565 | 629 | ||||||
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| Total long-term liabilities |
55,021 | 48,513 | ||||||
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| Total liabilities |
79,276 | 74,577 | ||||||
| SHAREHOLDERS’ EQUITY: |
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| Common stock |
131 | 130 | ||||||
| Additional paid-in capital |
60,075 | 57,735 | ||||||
| Accumulated other comprehensive loss |
(2,521 | ) | (2,525 | ) | ||||
| Retained earnings |
97,080 | 90,076 | ||||||
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| Total shareholders’ equity |
154,765 | 145,416 | ||||||
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| TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY |
$ | 234,041 | $ | 219,993 | ||||
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EXACTECH, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share amounts)
(Unaudited)
| Three Month Periods Ended September 30, |
Nine Month Periods Ended September 30, |
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| 2011 | 2010 | 2011 | 2010 | |||||||||||||
| NET SALES |
$ | 47,278 | $ | 42,023 | $ | 152,329 | $ | 138,693 | ||||||||
| COST OF GOODS SOLD |
14,898 | 13,704 | 48,156 | 47,810 | ||||||||||||
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| Gross profit |
32,380 | 28,319 | 104,173 | 90,883 | ||||||||||||
| OPERATING EXPENSES: |
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| Sales and marketing |
18,041 | 15,711 | 57,292 | 46,914 | ||||||||||||
| General and administrative |
5,070 | 3,850 | 16,555 | 12,427 | ||||||||||||
| Research and development |
3,502 | 2,981 | 9,717 | 10,064 | ||||||||||||
| Depreciation and amortization |
3,663 | 2,682 | 10,642 | 7,619 | ||||||||||||
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| Total operating expenses |
30,276 | 25,224 | 94,206 | 77,024 | ||||||||||||
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| INCOME FROM OPERATIONS |
2,104 | 3,095 | 9,967 | 13,859 | ||||||||||||
| OTHER INCOME (EXPENSE): |
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| Interest income |
— | 1 | 3 | 3 | ||||||||||||
| Other income (loss) |
30 | 23 | 73 | 60 | ||||||||||||
| Interest expense |
(281 | ) | (198 | ) | (821 | ) | (458 | ) | ||||||||
| Foreign currency exchange gain (loss) |
(48 | ) | 852 | 845 | 669 | |||||||||||
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| Total other income (expense) |
(299 | ) | (678 | ) | 100 | 274 | ||||||||||
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| INCOME BEFORE INCOME TAXES |
1,805 | 3,773 | 10,067 | 14,133 | ||||||||||||
| PROVISION FOR INCOME TAXES |
494 | 2,290 | 3,063 | 6,377 | ||||||||||||
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| NET INCOME |
$ | 1,311 | $ | 1,483 | $ | 7,004 | $ | 7,756 | ||||||||
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| BASIC EARNINGS PER SHARE |
$ | 0.10 | $ | 0.11 | $ | 0.54 | $ | 0.60 | ||||||||
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| DILUTED EARNINGS PER SHARE |
$ | 0.10 | $ | 0.11 | $ | 0.53 | $ | 0.59 | ||||||||
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| SHARES – BASIC |
13,125 | 12,908 | 13,083 | 12,879 | ||||||||||||
| SHARES – DILUTED |
13,207 | 13,049 | 13,215 | 13,081 | ||||||||||||
| Adjusted net income to exclude the effect of HCP compliance expenses: |
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| Net Income |
$ | 1,311 | $ | 1,483 | $ | 7,004 | $ | 7,756 | ||||||||
| Adjustments for HCP compliance expenses: |
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| HCP compliance expenses, pre-tax |
951 | 216 | 3,692 | 795 | ||||||||||||
| Income tax benefit |
(329 | ) | (80 | ) | (1,343 | ) | (294 | ) | ||||||||
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| 622 | 136 | 2,349 | 501 | |||||||||||||
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| Adjusted net income – excluding HCP compliance expense |
$ | 1,933 | $ | 1,619 | $ | 9,353 | $ | 8,257 | ||||||||
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| Diluted earnings per share |
$ | 0.10 | $ | 0.11 | $ | 0.53 | $ | 0.59 | ||||||||
| Adjustment of HCP compliance expenses, net |
0.05 | 0.01 | 0.18 | 0.04 | ||||||||||||
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| Adjusted diluted earnings per share |
$ | 0.15 | $ | 0.12 | $ | 0.71 | $ | 0.63 | ||||||||
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