Exactech 2012 Revenue Up 9% to $224.3M, Net Income Up 44% to $12.7M, EPS $0.96

Exactech 2012 Revenue Up 9% to $224.3M, Net Income Up 44% to $12.7M, EPS $0.96

4Q'12 Revenue Up 12% to $59.3M, Net Income $3.9M, EPS $0.29

GAINESVILLE, Fla.--(BUSINESS WIRE)-- Exactech, Inc. (NAS: EXAC) , a developer and producer of bone and joint restoration products for hip, knee, shoulder and spine, announced today that revenue for 2012 increased 9% to $224.3 million from $205.4 million in 2011. Diluted earnings per share for the year was $0.96 based on net income of $12.7 million representing a 44% increase compared to net income of $8.8 million or $0.67 diluted EPS during 2011.

2012 Full Year Highlights and Segment Performance

• Revenue for the year increased 9% to $224.3 million

• Knee implant revenue increased 2% to $81.4 million

• Extremity implant revenue increased 30% to $52.1 million

• Hip implant revenue increased 21% to $40.8 million

• Biologic & spine segment revenues increased 1% to $24.5 million

• Other revenues decreased 6% to $25.6 million

2012 Fourth Quarter Highlights and Segment Performance

For the fourth quarter of 2012 revenue was $59.3 million, an increase of 12% over $53.1 million for the comparable period last year. Net income for the fourth quarter of 2012 increased 113% to $3.9 million, or $0.29 per diluted share compared to $1.8 million, or $0.14 per diluted share for the fourth quarter of 2011. Fourth quarter product revenues were as follows:

• Total revenue for the quarter increased 12% to $59.3 million

• Knee implant revenue increased 3% to $20.7 million

• Extremity implant revenue increased 35% to $14.9 million

• Hip implant revenue increased 12% to $10.4 million

• Biologic & spine segment revenues increased 9% to $6.4 million

• Other revenues increased 3% to $6.9 million

Management Comment

Exactech Chairman and CEO Dr. Bill Petty said, "Exactech finished 2012 on a strong note with a fourth quarter top line increase of 12%. For the full year, our growth again continued to exceed the market with a 9% improvement over 2011. The ongoing rollout of new products that are getting excellent reception from our surgeon customers and their patients together with improving growth in the U.S. domestic market and robust growth in the Asian and Latin American markets all contributed to a solid performance.

"We are especially pleased with the 44% increase in net income for 2012 compared to 2011. That reflected not only lower compliance costs, but also robust sales throughout our organization and focused efforts to control costs and increase margins through greater efficiencies. Great credit is due to the people of Exactech around the world, who performed exceptionally well and deserve full recognition for our ongoing success."

Exactech President David Petty said, "We continue to be enthusiastic about the market acceptance of our new product introductions and the results of the investments that we are making in R&D. Nothing characterizes this more than the exceptional growth rates of our shoulder replacement products. We have now led the industry in growth in this category for several years, which validates our leadership in providing meaningful clinical solutions for shoulder patients.

"Exactech hips also grew substantially above market rates at 21% even prior to new product launches planned for 2013. We are highly encouraged by early results from the limited release of our Element line extension and our new Crown Cup® acetabular system with InteGrip™ technology.

"Our knee products developed fresh momentum in the fourth quarter as we continued to transition to our new Optetrak Logic® platform. Additionally, business growth in Asia and Latin America was important to our 2012 results with strong hip and knee performance in Asia and hip, knee and shoulder growth in Latin America."

During the fourth quarter International sales grew 10% to $21.0 million. U.S. sales increased 13% to $38.3 million. For the full year 2012, U.S. sales increased 9% to $145.6 million, and international sales were up 9% to $78.7 million.

Chief Financial Officer Jody Phillips said, "Operationally, we made significant improvements during 2012. Gross margins increased to 69.4% for 2012 from 68.4% in 2011 due to continued cost reductions attributable to internal manufacturing. Total operating expenses for the year increased 6% to $134.3 million and as a percentage of sales decreased to 59.8% from 61.7% for 2011. General and administrative expenses decreased 8% for 2012 to $20.1 million from $22.0 million, primarily due to a reduction in compliance costs. Sales and marketing expenses increased 6% to $82.0 million primarily due to variable selling expenses. Research and development expenses increased 29% to $16.8 million during 2012 as we continue to actively invest in our new product pipeline."

Looking forward, Exactech released its initial 2013 revenue guidance of $236-$242 million and diluted EPS target of $1.03-$1.09. For the first quarter of 2013, the company anticipates revenues of $60-$62 million and diluted EPS of $0.28-$0.30 including an estimated $0.03 benefit due to the reinstatement of the Research and Development tax credit. 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, February 27th at 10:00 a.m. Eastern Time. The call will cover the company's fourth quarter 2012 results. Dr. Petty will open the conference call and a question-and-answer session will follow.

To participate in the call, dial 1-877-941-2068any time after 9:50 a.m. Eastern on February 27. International and local callers should dial 1-480-629-9712. 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://public.viavid.com/index.php?id=103302. 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.


(in thousands)
 (unaudited) (audited)
December 31,December 31,
2012 2011 
Cash and cash equivalents$5,838$4,663
Accounts receivable, net of allowances of $1,012 and $3,18648,07345,856
Prepaid expenses and other assets, net2,8773,948
Income taxes receivable502171
Inventories - current70,69961,724
Deferred tax assets - current 2,229  2,869 
Total current assets130,218119,231
Machinery and equipment33,15830,164
Surgical instruments85,11577,105
Furniture and fixtures3,8583,753
Projects in process 643  2,141 
Total property and equipment143,018133,302
Accumulated depreciation (61,586) (56,061)
Net property and equipment81,43277,241
Deferred financing and deposits, net8661,016
Non-current inventories5,4107,334
Product licenses and designs, net10,53411,380
Patents and trademarks, net2,2171,589
Customer relationships, net1,1081,545
Goodwill 13,356  13,276 
Total other assets 33,491  36,140 
TOTAL ASSETS$245,141 $232,612 
Accounts payable$14,773$12,909
Income taxes payable2,1884,210
Accrued expenses and other liabilities11,7268,957
Other current liabilities250344
Current portion of long-term debt 2,625  648 
Total current liabilities31,56227,068
Deferred tax liabilities3,1863,520
Line of credit12,19742,410
Long-term debt, net of current portion26,2503,507
Other long-term liabilities 1,049  780 
Total long-term liabilities 42,682  50,217 
Total liabilities74,24477,285
Common stock133132
Additional paid-in capital63,91860,565
Accumulated other comprehensive loss(4,797)(4,272)
Retained earnings 111,643  98,902 
Total shareholders' equity 170,897  155,327 

(in thousands, except per share amounts)
Three Month PeriodTwelve Month Periods
Ended December 31,Ended December 31,
NET SALES$59,25453,068$224,337$205,397
COST OF GOODS SOLD 18,043 16,691 68,731 64,847
Gross profit41,21136,377155,606140,550
Sales and marketing21,47819,95181,97977,243
General and administrative5,1925,41420,13921,969
Research and development4,1733,34216,80313,059
Depreciation and amortization 4,016 3,813 15,343 14,455
Total operating expenses34,85932,520134,264126,726
INCOME FROM OPERATIONS6,3523,85721,34213,824
Interest income35118
Other (expense) income30248797
Interest expense(300)(304)(1,456)(1,125)
Foreign currency gain (loss) (284) (339) (90) 506
Total other income (expenses)(551)(614)(1,448)(514)
INCOME BEFORE INCOME TAXES5,8013,24319,89413,310
PROVISION FOR INCOME TAXES1,9211,4217,1534,484
NET INCOME$3,880$1,822$12,741$8,826
BASIC EARNINGS PER SHARE$0.29$0.14$0.96$0.67
DILUTED EARNINGS PER SHARE$0.29$0.14$0.96$0.67
SHARES - BASIC13,31513,14213,23213,098
SHARES - DILUTED13,38313,20513,31713,212

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

KEYWORDS:   United States  North America  Florida


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