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 Exchange Act of 1934
Date of Report (Date of earliest event reported): February 12, 2015
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 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
On February 12, 2015, Albert Burstein, PhD, a director on the Board of Directors of Exactech, Inc. (the “Company”), notified the Company's Board of Directors that he will not seek re-election for another term as Director of the Company's Board of Directors, as he is retiring from certain activities. Dr. Burstein's current term ends at the 2015 annual meeting of shareholders. Dr. Burstein has been a director since March 1996, and is not a member of any board committee. Dr. Burstein did not resign pursuant to any disagreement with the Company.
Dr. Burstein will continue to serve as a consultant to the Company rendering services with respect to the orthopaedic industry, including product design rationale, manufacturing and development techniques and product sales and marketing.
Item 7.01. Regulation FD Disclosure.
On February 17, 2015, 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 February 17, 2015. |
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: | February 17, 2015 | | 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 February 17, 2015 |
Exactech 2014 Revenue Up 5% to $248.4 Million,
Net Income Up 7% to $16.5 Million, EPS $1.18
Q4 Revenue Up 3% to $63.3M, Net Income Up 11% to $5.1M, EPS $0.36
Gainesville, Fla. - February 17, 2015 -- Exactech, Inc. (Nasdaq: EXAC), a developer and producer of bone and joint restoration products for hip, knee, shoulder and spine, announced today that revenue for 2014 increased 5% to $248.4 million from $237.1 million in 2013. Diluted earnings per share for the year was $1.18 based on net income of $16.5 million, representing a 7% increase compared to net income of $15.4 million or $1.12 diluted earnings per share during 2013.
2014 Full Year Highlights and Segment Performance
Revenue for the year increased 5% to $248.4 million
Extremity implant revenue increased 21% to $79.0 million
Knee implant revenue decreased 2% to $78.7 million
Hip implant revenue increased 6% to $43.5 million
Biologic & spine revenues decreased 7% to $23.8 million
Other revenues decreased 5% to $23.4 million
2014 Fourth Quarter Highlights and Segment Performance
For the fourth quarter of 2014 revenue was $63.3 million, an increase of 3% over $61.6 million for the comparable period last year. Net income for the fourth quarter of 2014 increased 11% to $5.1 million, or $0.36 per diluted share, compared to $4.6 million, or $0.33 per diluted share, for the fourth quarter of 2013. Fourth quarter total and segment revenues were as follows:
Total revenue for the quarter increased 3% to $63.3 million
Extremity implant revenue increased 18% to $21.7 million
Knee implant revenue decreased 7% to $18.9 million
Hip implant revenue increased 12% to $11.3 million
Biologic & spine revenues decreased 8% to $6.1 million
Other revenues decreased 13% to $5.2 million
Management Comment
Exactech CEO and President David Petty said, “Total sales were up 5% to $248.4 million in 2014. Continuing double-digit strength in our shoulder segment resulted in our extremities implant revenue emerging as our largest revenue segment in 2014 with an increase of 21% to $79.0 million.
“The major success of our shoulder business was directly attributable to excellent results that our surgeon customers continue to achieve with our Equinoxe® shoulder system. With a strong pipeline of new products
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and a well-established competency in the segment, we believe this will continue to be a robust business segment in 2015. Our hip business received a strong boost during the year with introduction of the Alteon® brand, which features a Tapered Wedge Femoral Stem and Neck Preserving Femoral Stem. These innovations have also produced very positive feedback from surgeons, providing us with excellent momentum going into the new year.
“Currency issues had a particularly specific impact on our knee revenues, which represent the largest volume product that we sell outside of the U.S. Knee unit sales increased on a worldwide basis during the year although revenues slipped as pricing pressure was a factor. Based upon new product launches, sales force engagement, sales organization development and the product development pipeline, we see a number of positives in our knee business that we expect to be beneficial in the second half of 2015.
“U.S. sales for the year were up 4% to $165.6 million compared with $159.6 million in 2013. International sales increased 7% to $82.8 million. U.S. sales represented 67% of total sales and international sales were 33% of the total. For the fourth quarter of 2014 U.S. sales remained constant at $41.7 million as compared to the fourth quarter of 2013. International sales increased 9% to $21.6 million for the fourth quarter of 2014, which represented 34% of total sales,” Petty said.
Chief Financial Officer Jody Phillips said, “Full year gross margins increased to 70% compared with 69% for 2013 due to manufacturing cost reductions that offset some pricing pressure. Total operating expenses for the year increased 6% to $147.9 million and as a percentage of sales increased to 59.5% from 59.1% resulting in an operating profit increase of 10% to $26.3 million. Currency losses and income taxes significantly impacted our net income in the fourth quarter. The currency loss of $677,000 was partially offset by reinstatement of the Research and Development tax credit during the quarter.”
Looking forward, Exactech released its initial 2015 revenue guidance of $252-$260 million and diluted EPS target of $1.20-$1.28. For the first quarter of 2015, the company anticipates USGAAP revenues of $62-$65 million and diluted EPS of $0.30-$0.32. 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, February 18th at 10:00 a.m. Eastern Time. The call will cover Exactech’s fourth quarter and year end 2014 results. Petty will open the conference call and a question-and-answer session will follow.
To participate in the call, dial 1-888-504-7963 any time after 9:50 a.m. Eastern on February 18th. International and local callers should dial 1-719-457-2627. 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=112991.
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://
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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) | |
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| (unaudited) | | (audited) | |
| December 31, | | December 31, | |
| 2014 | | 2013 | |
ASSETS | | | | |
CURRENT ASSETS: | | | | |
Cash and cash equivalents | $ | 10,051 |
| | $ | 6,011 |
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Accounts receivable, net of allowances of $946 and $993 | 50,731 |
| | 59,109 |
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Prepaid expenses and other assets, net | 2,436 |
| | 2,865 |
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Income taxes receivable | 1,492 |
| | 1,331 |
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Inventories – current | 72,827 |
| | 71,590 |
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Deferred tax assets – current | 1,620 |
| | 1,653 |
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Total current assets | 139,157 |
| | 142,559 |
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PROPERTY AND EQUIPMENT: | | | | |
Land | 2,742 |
| | 2,215 |
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Machinery and equipment | 35,434 |
| | 35,439 |
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Surgical instruments | 101,142 |
| | 95,902 |
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Furniture and fixtures | 4,556 |
| | 4,200 |
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Facilities | 19,981 |
| | 19,187 |
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Projects in process | 1,166 |
| | 852 |
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Total property and equipment | 165,021 |
| | 157,795 |
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Accumulated depreciation | (84,915 | ) | | (76,127 | ) | |
Net property and equipment | 80,106 |
| | 81,668 |
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OTHER ASSETS: | | | | |
Deferred financing and deposits, net | 676 |
| | 870 |
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Non-current inventories | 17,465 |
| | 11,100 |
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Product licenses and designs, net | 8,641 |
| | 9,457 |
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Patents and trademarks, net | 1,701 |
| | 2,005 |
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Customer relationships, net | 203 |
| | 669 |
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Goodwill | 13,091 |
| | 13,514 |
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Total other assets | 41,777 |
| | 37,615 |
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TOTAL ASSETS | $ | 261,040 |
| | $ | 261,842 |
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LIABILITIES AND SHAREHOLDERS’ EQUITY | | | | |
CURRENT LIABILITIES: | | | | |
Accounts payable | $ | 13,615 |
| | $ | 16,254 |
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Income taxes payable | 146 |
| | 39 |
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Accrued expenses and other liabilities | 9,194 |
| | 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 | 26,205 |
| | 30,517 |
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LONG-TERM LIABILITIES: | | | | |
Deferred tax liabilities | 2,794 |
| | 4,200 |
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Line of credit | — |
| | 10,732 |
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Long-term debt, net of current portion | 20,250 |
| | 23,250 |
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Other long-term liabilities | 420 |
| | 719 |
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Total long-term liabilities | 23,464 |
| | 38,901 |
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Total liabilities | 49,669 |
| | 69,418 |
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SHAREHOLDERS’ EQUITY: | | | | |
Common stock | 139 |
| | 136 |
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Additional paid-in capital | 76,126 |
| | 69,175 |
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Accumulated other comprehensive loss | (8,397 | ) | | (3,902 | ) | |
Retained earnings | 143,503 |
| | 127,015 |
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Total shareholders’ equity | 211,371 |
| | 192,424 |
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TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | $ | 261,040 |
| | $ | 261,842 |
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EXACTECH, INC. AND SUBSIDIARIES |
CONDENSED CONSOLIDATED STATEMENTS OF INCOME |
(in thousands, except per share amounts) |
(Unaudited) |
| | | | | | | | |
| Three Month Periods | | Twelve Month Periods | |
| Ended December 31, | | Ended December 31, | |
| 2014 | | 2013 | | 2014 | | 2013 | |
NET SALES | $ | 63,312 |
| | $ | 61,578 |
| | $ | 248,373 |
| | $ | 237,088 |
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COST OF GOODS SOLD | 19,116 |
| | 19,228 |
| | 74,244 |
| | 73,019 |
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Gross profit | 44,196 |
| | 42,350 |
| | 174,129 |
| | 164,069 |
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OPERATING EXPENSES: | | | | | | | | |
Sales and marketing | 21,894 |
| | 21,718 |
| | 89,796 |
| | 84,999 |
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General and administrative | 5,860 |
| | 5,348 |
| | 22,692 |
| | 21,149 |
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Research and development | 4,856 |
| | 4,279 |
| | 18,377 |
| | 17,802 |
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Depreciation and amortization | 4,255 |
| | 4,198 |
| | 16,990 |
| | 16,190 |
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Total operating expenses | 36,865 |
| | 35,543 |
| | 147,855 |
| | 140,140 |
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INCOME FROM OPERATIONS | 7,331 |
| | 6,807 |
| | 26,274 |
| | 23,929 |
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OTHER INCOME (EXPENSE): | | | | | | | | |
Interest income | 3 |
| | 3 |
| | 16 |
| | 8 |
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Other income | 25 |
| | 69 |
| | 78 |
| | 138 |
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Interest expense | (251 | ) | | (371 | ) | | (1,111 | ) | | (1,223 | ) | |
Foreign currency exchange gain (loss) | (677 | ) | | (132 | ) | | (1,129 | ) | | (444 | ) | |
Total other income (expense) | (900 | ) | | (431 | ) | | (2,146 | ) | | (1,521 | ) | |
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INCOME BEFORE INCOME TAXES | 6,431 |
| | 6,376 |
| | 24,128 |
| | 22,408 |
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PROVISION FOR INCOME TAXES | 1,312 |
| | 1,781 |
| | 7,640 |
| | 7,036 |
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NET INCOME | $ | 5,119 |
| | $ | 4,595 |
| | $ | 16,488 |
| | $ | 15,372 |
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BASIC EARNINGS PER SHARE | $ | 0.37 |
| | $ | 0.34 |
| | $ | 1.20 |
| | $ | 1.14 |
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DILUTED EARNINGS PER SHARE | $ | 0.36 |
| | $ | 0.33 |
| | $ | 1.18 |
| | $ | 1.12 |
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SHARES - BASIC | 13,837 |
| | 13,546 |
| | 13,732 |
| | 13,462 |
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SHARES - DILUTED | 14,083 |
| | 13,844 |
| | 14,016 |
| | 13,683 |
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