UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities and Exchange Act of 1934
Date of Report (Date of earliest event reported): October 21, 2014
EXACTECH, INC.
(Exact Name of Registrant as Specified in Its Charter)
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Florida | 0-28240 | 59-2603930 |
(State or Other Jurisdiction of Incorporation) | (Commission File Number) | (IRS Employer Identification No.) |
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2320 NW 66th Court Gainesville, Florida 32653 |
(Address of Principal Executive Office) |
Registrant’s telephone number, including area code (352) 377-1140
(Former Name or Former Address, if Changed Since Last Report)
__________________________
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
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[ ] | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
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[ ] | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 2.02. Results of Operations and Financial Condition
The disclosure set forth in Item 7.01 to this Current Report on Form 8-K is incorporated into this Item 2.02 by reference.
Item 7.01. Regulation FD Disclosure.
On October 21, 2014, Exactech, Inc. (the “Company”) issued a press release disclosing certain financial information about the Company. A copy of the press release is furnished as Exhibit 99.1 to this Current Report on Form 8-K and is hereby incorporated by reference in this Item 7.01.
The press release attached as an exhibit to this report contain various “forward looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which represent the Company’s expectations or beliefs concerning future events, including, but not limited to, statements regarding levels of and expected growth in sales of the Company’s products. When used in the press release or this report, the terms “anticipate,” “believe,” “estimate,” “expect” and “intend” and words or phrases of similar import, as they relate to the Company or its subsidiaries or its management, are intended to identify forward-looking statements. 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, without limitation, the effect of competitive pricing, the Company’s dependence on the ability of its third-party suppliers to produce components on a cost-effective basis to the Company, market acceptance of the Company’s products, the outcome of litigation, the availability of third-party reimbursement for the Company’s products, high inventory maintenance requirements, the Company’s ability to protect its intellectual property, dedication of substantial resources towards research and development efforts, product liability risks and the effects of governmental regulation. Results actually achieved may differ materially from expected results included in these statements as a result of these or other factors, including those risks disclosed in the reports filed by the Company with the Securities and Exchange Commission. Exactech undertakes no obligation to update, and the Company does not have a policy of updating or revising, these forward-looking statements. The information in this report will not be deemed an admission as to the materiality of any information required to be disclosed solely to satisfy the requirements of Regulation FD. The furnishing of this information is not intended to, and does not, constitute a determination or admission by the Company that such information is material or complete, or that investors should consider this information before making an investment decision with respect to any security of the Company.
The information contained in Items 2.02 and 7.01 to this Current Report on Form 8-K, including Exhibit 99.1, attached hereto, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing by the Company under the Securities Act of 1933, as amended.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits.
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Exhibit Number | Description |
99.1 | Press Release issued by the Company on October 21, 2014. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
EXACTECH, INC.
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Date: | October 21, 2014 | | By: | /s/ Joel C. Phillips |
| | | | Joel C. Phillips |
| | | | Chief Financial Officer |
EXHIBIT INDEX
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Exhibit Number | Description |
99.1 | Press Release issued by the Company on October 21, 2014 |
Exactech Q3 Revenue Up 4% to $57.9 Million; Net Income Down 6% to $3.0 Million Due to Currency Losses; Q3 Diluted EPS $0.21 vs. $0.23
Nine Months Revenue Up 5% to $185.1 Million; Net Income Up 5% to $11.4 Million or $0.81 EPDS
Gainesville, Fla. - October 21, 2014 -- Exactech, Inc. (Nasdaq: EXAC), a developer and producer of bone and joint restoration products for hip, knee, shoulder and spine, announced today revenue of $57.9 million for the third quarter of 2014, a 4% increase over $55.7 million in the third quarter of 2013. Net income was $3.0 million, or $0.21 per diluted share, compared to $3.2 million, or $0.23 per diluted share, in the same quarter a year ago.
Third Quarter Segment Performance
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• | Extremity implant revenue increased 23% to $18.6 million |
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• | Knee implant revenue decreased 2% to $18.1 million |
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• | Hip implant revenue increased 4% to $10.2 million |
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• | Biologic and Spine revenue decreased 10% to $5.4 million |
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• | Other revenue decreased 9% to $5.6 million |
Nine Months Highlights and Segment Performance
For the nine months of 2014, revenue was $185.1 million, an increase of 5% over $175.5 million for the comparable period last year. Net income for the first nine months of 2014 increased 5% to $11.4 million, or $0.81 per diluted share compared to $10.8 million, or $0.79 per diluted share for the first nine months of 2013. Nine month product revenues were as follows:
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• | Extremity implant revenue increased 22% to $57.3 million |
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• | Knee implant revenue decreased 1% to $59.8 million |
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• | Hip implant revenue increased 4% to $32.2 million |
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• | Biologic and spine revenue decreased 6% to $17.7 million |
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• | Other products revenue decreased 2% to $18.2 million |
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Management Comment
Exactech CEO and President David Petty said, “Total sales were up 4% to $57.9 million in the third quarter and up 5% to $185.1 million for the first nine months. Continuing double-digit strength in our shoulder segment resulted in our extremities implant revenue emerging as our largest revenue segment in the quarter with an increase of 23% to $18.6 million. This surpassed revenue in our knee segment, which decreased 2% to $18.1 million year over year in the quarter. Sluggish knee sales in Europe and the U.S. contributed to the knee revenue performance. Our hip segment continued to perform well with a 4% gain to $10.2 million, and we experienced weakness in our other segments. Net income slipped 6% to $3.0 million reflecting a $923,000 negative foreign exchange swing as compared to the third quarter of last year.
“U.S. sales for the quarter were up 2% to $40.0 million compared with $39.1 million in the third quarter a year ago. International sales increased 8% to $17.9 million. U.S. sales represented 69% of total sales and international sales were 31% of the total. For the first nine months of 2014, U.S. sales rose 5% to $123.8 million compared with $117.9 million in 2013, representing 67% of total sales. International sales increased 6% to $61.2 million and remained at 33% of total sales,” Petty said.
Chief Financial Officer Jody Phillips said, “Gross margins remained at 71% for each of the third quarters for 2014 and 2013. Total operating expenses for the third quarter increased 2% to $35.4 million and as a percentage of sales decreased to 61% from 62% resulting in an operating profit increase of 14% to $5.5 million. Our balance sheet remained strong with a further decrease in long-term debt reflecting healthy cash flow.
Looking forward, Exactech updated its 2014 revenue guidance to $247-$249 million and its diluted EPS target to $1.14-$1.16. For the fourth quarter ending December 31, 2014, the company said it anticipates revenues of $62-$64 million and diluted EPS of $0.33-$0.35 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 will hold a conference call with CEO David Petty and key members of the management team on Wednesday, October 22nd, 2014 at 10:00 a.m. Eastern Time. The call will cover Exactech’s third quarter 2014 results. Petty will open the conference call and a question-and-answer session will follow.
To participate in the call, dial 1-888-329-8877 any time after 9:50 a.m. Eastern on Wednesday, October 22nd. International and local callers should dial 1-719-457-2085. 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=111204. 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.
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EXACTECH INC.
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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.
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EXACTECH, INC. AND SUBSIDIARIES | |
CONDENSED CONSOLIDATED BALANCE SHEETS | |
(in thousands) | |
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| (unaudited) | | (audited) | |
| September 30, | | December 31, | |
| 2014 | | 2013 | |
ASSETS | | | | |
CURRENT ASSETS: | | | | |
Cash and cash equivalents | $ | 9,086 |
| | $ | 6,011 |
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Accounts receivable, net of allowances of $821 and $993 | 46,342 |
| | 59,109 |
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Prepaid expenses and other assets, net | 3,711 |
| | 2,865 |
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Income taxes receivable | 550 |
| | 1,331 |
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Inventories – current | 74,171 |
| | 71,590 |
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Deferred tax assets – current | 1,521 |
| | 1,653 |
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Total current assets | 135,381 |
| | 142,559 |
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PROPERTY AND EQUIPMENT: | | | | |
Land | 2,208 |
| | 2,215 |
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Machinery and equipment | 34,321 |
| | 35,439 |
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Surgical instruments | 100,946 |
| | 95,902 |
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Furniture and fixtures | 4,547 |
| | 4,200 |
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Facilities | 19,251 |
| | 19,187 |
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Projects in process | 1,133 |
| | 852 |
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Total property and equipment | 162,406 |
| | 157,795 |
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Accumulated depreciation | (82,350 | ) | | (76,127 | ) | |
Net property and equipment | 80,056 |
| | 81,668 |
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OTHER ASSETS: | | | | |
Deferred financing and deposits, net | 1,375 |
| | 870 |
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Non-current inventories | 17,089 |
| | 11,100 |
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Product licenses and designs, net | 8,664 |
| | 9,457 |
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Patents and trademarks, net | 1,777 |
| | 2,005 |
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Customer relationships, net | 317 |
| | 669 |
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Goodwill | 13,224 |
| | 13,514 |
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Total other assets | 42,446 |
| | 37,615 |
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TOTAL ASSETS | $ | 257,883 |
| | $ | 261,842 |
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LIABILITIES AND SHAREHOLDERS’ EQUITY | | | | |
CURRENT LIABILITIES: | | | | |
Accounts payable | $ | 15,631 |
| | $ | 16,254 |
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Income taxes payable | — |
| | 39 |
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Accrued expenses and other liabilities | 8,693 |
| | 10,974 |
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Other current liabilities | 250 |
| | 250 |
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Current portion of long-term debt | 3,000 |
| | 3,000 |
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Total current liabilities | 27,574 |
| | 30,517 |
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LONG-TERM LIABILITIES: | | | | |
Deferred tax liabilities | 2,890 |
| | 4,200 |
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Line of credit | — |
| | 10,732 |
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Long-term debt, net of current portion | 21,000 |
| | 23,250 |
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Other long-term liabilities | 432 |
| | 719 |
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Total long-term liabilities | 24,322 |
| | 38,901 |
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Total liabilities | 51,896 |
| | 69,418 |
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SHAREHOLDERS’ EQUITY: | | | | |
Common stock | 138 |
| | 136 |
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Additional paid-in capital | 74,315 |
| | 69,175 |
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Accumulated other comprehensive loss | (6,850 | ) | | (3,902 | ) | |
Retained earnings | 138,384 |
| | 127,015 |
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Total shareholders’ equity | 205,987 |
| | 192,424 |
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TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | $ | 257,883 |
| | $ | 261,842 |
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EXACTECH INC.
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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, | |
| 2014 | | 2013 | | 2014 | | 2013 | |
NET SALES | $ | 57,884 |
| | $ | 55,650 |
| | $ | 185,061 |
| | $ | 175,510 |
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COST OF GOODS SOLD | 16,929 |
| | 16,126 |
| | 55,128 |
| | 53,791 |
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Gross profit | 40,955 |
| | 39,524 |
| | 129,933 |
| | 121,719 |
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OPERATING EXPENSES: | | | | | | | | |
Sales and marketing | 21,304 |
| | 20,274 |
| | 67,902 |
| | 63,281 |
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General and administrative | 5,380 |
| | 5,384 |
| | 16,832 |
| | 15,801 |
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Research and development | 4,464 |
| | 5,068 |
| | 13,521 |
| | 13,523 |
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Depreciation and amortization | 4,289 |
| | 3,963 |
| | 12,735 |
| | 11,992 |
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Total operating expenses | 35,437 |
| | 34,689 |
| | 110,990 |
| | 104,597 |
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INCOME FROM OPERATIONS | 5,518 |
| | 4,835 |
| | 18,943 |
| | 17,122 |
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OTHER INCOME (EXPENSE): | | | | | | | | |
Interest income | 5 |
| | 2 |
| | 13 |
| | 5 |
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Other income | 3 |
| | 18 |
| | 53 |
| | 69 |
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Interest expense | (253 | ) | | (281 | ) | | (860 | ) | | (852 | ) | |
Foreign currency exchange gain (loss) | (652 | ) | | 271 |
| | (452 | ) | | (312 | ) | |
Total other income (expense) | (897 | ) | | 10 |
| | (1,246 | ) | | (1,090 | ) | |
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INCOME BEFORE INCOME TAXES | 4,621 |
| | 4,845 |
| | 17,697 |
| | 16,032 |
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PROVISION FOR INCOME TAXES | 1,610 |
| | 1,653 |
| | 6,328 |
| | 5,255 |
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NET INCOME | $ | 3,011 |
| | $ | 3,192 |
| | $ | 11,369 |
| | $ | 10,777 |
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BASIC EARNINGS PER SHARE | $ | 0.22 |
| | $ | 0.24 |
| | $ | 0.83 |
| | $ | 0.80 |
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DILUTED EARNINGS PER SHARE | $ | 0.21 |
| | $ | 0.23 |
| | $ | 0.81 |
| | $ | 0.79 |
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SHARES - BASIC | 13,766 |
| | 13,494 |
| | 13,690 |
| | 13,433 |
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SHARES - DILUTED | 14,064 |
| | 13,712 |
| | 13,989 |
| | 13,632 |
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EXACTECH INC.
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