Exactech Q3 2015 Revenue $56.2 Million. Net Income $2.9 Million. Diluted EPS $0.20.

GAINESVILLE, Fla.--()--Exactech, Inc. (Nasdaq:EXAC), a developer and producer of bone and joint restoration products for hip, knee, shoulder and spine, announced today revenue of $56.2 million for the third quarter of 2015, a 3% decrease from $57.9 million in the third quarter of 2014. On a constant currency basis for the quarter, revenue was flat. Net income was down 4% to $2.9 million, or $0.20 per diluted share, compared to $3.0 million, or $0.21 per diluted share, in the same quarter a year ago.

Third Quarter Segment Performance

The third quarter of 2015 continued to be impacted by a weakened Euro and Japanese Yen relative to the U.S. Dollar. The following are company revenue results, as well as adjusted revenue comparisons on a constant currency basis:

  • Extremity implant revenue increased 7% to $20.0 million, a 9% constant currency increase
  • Knee implant revenue decreased 16% to $15.3 million, a 13% constant currency decrease
  • Hip implant revenue decreased 2% to $9.9 million, a 4% constant currency increase
  • Biologic and Spine revenue increased 5% to $5.7 million, an 8% constant currency increase
  • Other revenue decreased 4% to $5.4 million, a 3% constant currency decrease

Nine Months Highlights and Segment Performance

For the first nine months of 2015, revenue was $179.1 million, a decrease of 3% over $185.1 million for the comparable period last year. On a constant currency basis, revenue for the first nine months of 2015 was flat. Net income for the first nine months of 2015 decreased 6% to $10.7 million, or $0.75 per diluted share compared to $11.4 million, or $0.81 per diluted share for the first nine months of 2014. First nine month product revenues were as follows:

  • Extremity implant revenue increased 7% to $61.5 million, a 9% constant currency increase
  • Knee implant revenue decreased 12% to $52.7 million, a 7% constant currency decrease
  • Hip implant revenue decreased 1% to $31.8 million, a 4% constant currency increase
  • Biologic and Spine revenue decreased 6% to $16.7 million, a 2% constant currency decrease
  • Other revenue decreased 10% to $16.4 million, a 9% constant currency decrease

Management Comment

Exactech CEO and President David Petty said, “Another solid performance in our largest segment, Extremities, and third quarter improvement in our Biologic and Spine segment and gains in overall U.S. sales were not enough to offset strong international currency headwinds and soft results in European and Latin American markets. Worldwide sales for the first nine months of 2015 decreased 3% to $179.1 million but were flat on a constant currency basis. U.S. sales were relatively flat at $123.3 million compared with $123.8 million in the first nine months a year ago. International sales decreased 9% in the first nine months to $55.8 million and were up 1% on a constant currency basis. For the third quarter of 2015, U.S. sales were up 2% to $40.7 million compared with $40.0 million in the third quarter a year ago. International sales decreased 13% to $15.5 million. On a constant currency basis, international sales were down 4% and worldwide sales were flat for the third quarter. U.S. sales represented 72% of total sales and international sales were 28% of the total,” Petty said.

Chief Financial Officer Jody Phillips said, “Gross margins decreased to 70.5% for the third quarter of 2015 vs. 70.7% in the third quarter of 2014 due to pricing and currency impacts. Total operating expenses for the quarter decreased 1% to $35.1 million and as a percentage of sales were 62%, compared to $35.4 million and 61% for the same quarter of 2014. General and administrative expenses decreased 4% in the third quarter to $5.2 million and sales and marketing expenses decreased 3% to $20.6 million primarily due to currency impacts. We experienced an 18% increase in R&D spending to $5.3 million related to development and launch costs associated with our new revision products. We continued to produce positive cash flows, which resulted in a $2.9 million improvement in our cash and net debt position during the third quarter.”

Looking forward, Exactech confirmed its updated 2015 revenue guidance to $239-$241 million and updated its diluted EPS target to $1.02–$1.04. The resulting revenue guidance for the fourth quarter of 2015 is for revenues of $60-$62 million and a diluted EPS target of $0.27-$0.29. The foregoing statements regarding targets for the 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 will hold a conference call with CEO David Petty and key members of the management team on Wednesday, October 28th at 10:00 a.m. Eastern Time. The call will cover Exactech’s third quarter 2015 results. Petty will open the conference call and a question-and-answer session will follow.

To participate in the call, dial 1-888-417-8533 any time after 9:50 a.m. Eastern on October 28th. International and local callers should dial 1-719-457-2645. 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=116694.

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)
June 30, December 31,
  2015   2014
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 17,051 $ 10,051
Trade receivables, net of allowances of $807 and $946 50,283 50,731
Prepaid expenses and other assets, net 3,692 2,436
Income taxes receivable 829 1,492
Inventories, current 72,348 72,827
Deferred tax assets   1,647   1,620
Total current assets 145,850 139,157
 
PROPERTY AND EQUIPMENT:
Land 2,692 2,742
Machinery and equipment 36,877 35,434
Surgical instruments 109,939 101,142
Furniture and fixtures 4,720 4,556
Facilities 20,247 19,981
Projects in process   711   1,166
Total property and equipment 175,186 165,021
Accumulated depreciation   (95,579 )   (84,915 )
Net property and equipment 79,607 80,106
 
OTHER ASSETS:
Deferred financing and deposits, net 582 676
Non-current inventory 18,733 17,465
Product licenses and designs, net 11,693 8,641
Patents and trademarks, net 1,492 1,701
Customer relationships, net 111 203
Goodwill   19,098   13,091
Total other assets   51,709   41,777
TOTAL ASSETS $ 277,166 $ 261,040
 
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable $ 12,642 $ 13,615
Income taxes payable 167 146
Accrued expenses 9,113 9,194
Other current liabilities 1,381 250
Current portion of long-term debt   3,000   3,000
Total current liabilities 26,303 26,205
 
LONG-TERM LIABILITIES:
Deferred tax liabilities 3,756 2,794
Long-term debt, net of current portion 18,000 20,250
Other long-term liabilities   5,582   420
Total long-term liabilities   27,338   23,464
Total liabilities 53,641 49,669
 
COMMITMENTS AND CONTINGENCIES
 
SHAREHOLDERS’ EQUITY:
Common stock 141 139
Additional paid-in capital 80,347 76,126
Accumulated other comprehensive loss, net of tax (11,117 ) (8,397 )
Retained earnings   154,154   143,503
Total shareholders’ equity   223,525   211,371
 
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY $ 277,166 $ $261,040
 
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,
  2015   2014   2015   2014
NET SALES $ 56,237 $ 57,884 $ 179,106 $ 185,061
 
COST OF GOODS SOLD   16,597   16,929   54,573   55,128
Gross profit 39,640 40,955 124,533 129,933
 
OPERATING EXPENSES:
Sales and marketing 20,587 21,304 63,901 67,902
General and administrative 5,180 5,380 16,803 16,832
Research and development 5,258 4,464 14,389 13,521
Depreciation and amortization   4,073   4,289   12,697   12,735
Total operating expenses 35,098 35,437 107,790 110,990
       
INCOME FROM OPERATIONS 4,542 5,518 16,743 18,943
 
OTHER INCOME (EXPENSE):
Interest income 3 5 7 13
Other income (loss) 26 3 91 53
Interest expense (283 ) (253 ) (860 ) (860 )
Foreign currency exchange loss   (103 )   (652 )   (862 )   (452 )
Total other income (expenses) (357 ) (897 ) (1,624 ) (1,246 )
       
INCOME BEFORE INCOME TAXES 4,185 4,621 15,119 17,697
 
PROVISION FOR INCOME TAXES 1,307 1,610 4,468 6,328
       
NET INCOME $ 2,878 $ 3,011 $ 10,651 $ 11,369
 
 
BASIC EARNINGS PER SHARE $ 0.20 $ 0.22 $ 0.76 $ 0.83
 
DILUTED EARNINGS PER SHARE $ 0.20 $ 0.21 $ 0.75 $ 0.81
 
 
SHARES - BASIC 14,058 13,766 13,996 13,690
 
SHARES - DILUTED 14,201 14,064 14,201 13,989
 

Contacts

Exactech, Inc.
Investor Contacts:
Jody Phillips, 352-377-1140
Executive Vice President of Finance &
Chief Financial Officer
or
Hawk Associates
Julie Marshall or Frank Hawkins, 305-451-1888
EXAC@hawkassociates.com

Contacts

Exactech, Inc.
Investor Contacts:
Jody Phillips, 352-377-1140
Executive Vice President of Finance &
Chief Financial Officer
or
Hawk Associates
Julie Marshall or Frank Hawkins, 305-451-1888
EXAC@hawkassociates.com