Exactech, Inc. (Nasdaq:EXAC), a developer and producer of bone
and joint restoration products for hip, knee, extremity, spine and
biologic materials, today announced revenue of $59.9 million for
the third quarter of 2016, a 7% increase from $56.2 million in the
third quarter of 2015. On a constant currency basis, revenue was up
6%. Net income increased 10% to $3.2 million, or $0.22 per diluted
share, compared to $2.9 million, or $0.20 per diluted share, in the
same quarter a year ago.
Third Quarter Segment Performance
The following are company revenue results, as well as adjusted
revenue comparisons on a constant currency basis:
- Extremity implant revenue increased 14%
to $22.8 million, a 15% constant currency increase
- Knee implant revenue increased 11% to
$17.0 million, a 10% constant currency increase
- Hip implant revenue increased 17% to
$11.6 million, a 14% constant currency increase
- Biologic and Spine revenue decreased
23% to $4.4 million, a 22% constant currency decrease
- Other revenue decreased 21% to $4.2
million, a 22% constant currency decrease
Nine Months Highlights and Segment Performance
For the first nine months of 2016, revenue was $191.3 million,
an increase of 7% over $179.1 million for the comparable period
last year. On a constant currency basis, revenue for the first nine
months of 2016 was also up 7%. Net income for the first nine months
of 2016 increased 12% to $12.0 million, or $0.84 per diluted share
compared to $10.7 million, or $0.75 per diluted share, for the
first nine months of 2015. First nine month product revenues were
as follows:
- Extremity implant revenue increased 16%
to $71.2 million, a 16% constant currency increase
- Knee implant revenue increased 5% to
$55.6 million, a 5% constant currency increase
- Hip implant revenue increased 11% to
$35.3 million, a 10% constant currency increase
- Biologic and Spine revenue decreased 9%
to $15.2 million, a 8% constant currency decrease
- Other revenue decreased 14% to $14.1
million, a 14% constant currency decrease
Management Comment
Exactech CEO and President David Petty said, "We were very
pleased with strong double digit growth in our Extremities, Knee
and Hip businesses. The momentum in our Extremities segment is
based on the continuing successful adoption of the Equinoxe
shoulder system and notably with our highly competitive range of
glenoid solutions. The Equinoxe Humeral Reconstruction Prosthesis
launched earlier in the year also contributed positively to the
good quarter. Success in developing our U.S. sales channels was
helpful in all three major joint segments. We continued ramping up
availability of the Alteon Monoblock Revision Hip stem, which
supported 17% hip growth for the quarter. Similarly, our knee
revision system contributed positively to 11% knee growth this
quarter. In the fourth quarter and the first half of next year, we
are moving from the pilot launch phase into a limited launch of the
revision knee. This should be increasingly important to growth in
coming quarters. We were disappointed with results in our smaller
segments, attributable in part to pricing pressures and slower
adoption of new products.
"Our new Vantage Total Ankle system achieved an important
milestone during the third quarter with successful treatment of the
first patient. The pilot launch phase starts in the fourth quarter
and continues the first part of next year. During the third quarter
we also recorded our first successful surgeries with the new
ExactechGPS® total shoulder application and we expanded our
computer-assisted surgery system with a revision total knee
application. Adding these two applications to the ExactechGPS
platform can facilitate commercial adoption of the system in
2017.
“Worldwide sales increased 7% to $191.3 million for the first
nine months of 2016. U.S. sales were up 7% to $131.4 million
compared with $123.3 million in the first nine months a year ago.
International sales increased 7% to $59.9 million in the first nine
months of 2016 and increased 7% on a constant currency basis. U.S.
sales for the third quarter of 2016 were up 4% to $42.2 million
compared with $40.7 million in the third quarter a year ago.
International sales increased 14% to $17.7 million from $15.5
million in the third quarter of 2015 which reflected a 12% constant
currency increase. U.S. sales represented 70% of total, sales and
international sales represented 30% of total sales during the third
quarter."
Chief Financial Officer Jody Phillips said, “Gross margins
decreased to 68.7% from 70.5% for the third quarter a year ago,
primarily due to growth in our international distribution business
and general pricing pressures. Total operating expenses for the
quarter increased 4% to $36.6 million; however, as a percentage of
sales, decreased to 61% for the third quarter of 2016. Sales and
marketing expenses increased 5% to $21.7 million, due to expanding
medical education programs and product launch expenses. General and
administrative expenses remained flat at $5.2 million and research
and development expenses decreased 3% to $5.1 million during the
third quarter though we expect those expenses to increase going
forward.”
Looking forward, Exactech updated its 2016 revenue guidance to
$256-$258 million and its diluted full year EPS target to
$1.15–$1.17. This translates to anticipated revenues of $64.7-$66.7
million and diluted EPS of $0.31-$0.33 for the fourth quarter
ending December 31, 2016. 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 Tuesday,
November 1st at 9:00 a.m. Eastern Time. The call will cover
Exactech’s third quarter 2016 results. Mr. Petty will open the
conference call and a question-and-answer session will follow.
To participate in the call, dial 1-877-440-5803 any time
after 8:50 a.m. Eastern on November 1st. International and local
callers should dial 1-719-325-4765. 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=121574. 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.
Non-GAAP financial measures – Because we operate
internationally, we present the percentage change in sales by
reporting segment on a constant currency basis, which is a non-GAAP
financial measure. We calculate this change on a constant currency
basis by translating current period sales at the comparable average
historical exchange rates for the same period in the prior year. We
believe that presenting the percentage change in sales on a
constant currency basis assists in the understanding of actual
sales fluctuations by excluding the impact of foreign currency
fluctuations.
EXACTECH, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (in thousands)
(unaudited) (audited) September
30, December 31, 2016 2015
ASSETS CURRENT ASSETS: Cash and cash equivalents $ 12,613 $
12,713 Trade receivables, net of allowances of $1,122 and $1,011
50,712 52,442 Prepaid expenses and other assets, net 3,615 2,552
Income taxes receivable 229 486 Inventories, current 77,566
71,429 Total current assets 144,735 139,622 PROPERTY
AND EQUIPMENT: Land 4,510 4,494 Machinery and equipment 39,968
37,008 Surgical instruments 134,426 123,533 Furniture and fixtures
4,665 4,655 Facilities 21,366 20,348 Projects in process
3,334 1,218 Total property and equipment 208,269 191,256
Accumulated depreciation (102,046 ) (96,713 ) Net
property and equipment 106,223 94,543 OTHER ASSETS: Deferred
financing and deposits, net 889 858 Deferred tax assets 1,204 —
Non-current inventory 12,341 8,995 Product licenses and designs,
net 10,396 11,121 Patents and trademarks, net 1,228 1,426 Customer
relationships, net 577 92 Goodwill 22,479 18,850
Total other assets 49,114 41,342
TOTAL ASSETS
$ 300,072 $ 275,507
LIABILITIES AND SHAREHOLDERS’
EQUITY CURRENT LIABILITIES: Accounts payable $ 14,111 $ 13,932
Income taxes payable 2,046 603 Accrued expenses 11,112 9,498 Other
current liabilities 3,172 792 Total current
liabilities 30,441 24,825 LONG-TERM LIABILITIES: Deferred
tax liabilities 213 443 Long-term debt, net of current portion
20,000 16,000 Other long-term liabilities 5,607 5,850
Total long-term liabilities 25,820 22,293 Total
liabilities 56,261 47,118 COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS’ EQUITY: Common stock 143 142 Additional
paid-in capital 86,120 81,963 Treasury Stock (3,042 ) — Accumulated
other comprehensive loss, net of tax (9,633 ) (11,986 ) Retained
earnings 170,223 158,270 Total shareholders’ equity
243,811 228,389
TOTAL LIABILITIES AND
SHAREHOLDERS’ EQUITY $ 300,072 $ 275,507
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, 2016 2015
2016 2015 NET SALES $ 59,919 $ 56,237 $ 191,341 $ 179,106
COST OF GOODS SOLD 18,772 16,597 59,408
54,573 Gross profit 41,147 39,640 131,933 124,533
OPERATING EXPENSES: Sales and marketing 21,684 20,587 68,838 63,901
General and administrative 5,186 5,180 16,740 16,803 Research and
development 5,096 5,258 15,495 14,389 Depreciation and amortization
4,592 4,073 13,326 12,697 Total
operating expenses 36,558 35,098 114,399 107,790
INCOME FROM OPERATIONS 4,589 4,542 17,534 16,743
OTHER INCOME (EXPENSE): Interest income 29 3 35 7 Other
income (loss) 43 26 115 91 Interest expense (186 ) (283 ) (716 )
(860 ) Foreign currency exchange (loss) gain 73 (103
) 665 (862 ) Total other income (expenses) (41 ) (357
) 99 (1,624 ) INCOME BEFORE INCOME
TAXES 4,548 4,185 17,633 15,119 PROVISION FOR INCOME TAXES
1,383 1,307 5,680 4,468 NET INCOME $
3,165 $ 2,878 $ 11,953 $ 10,651 BASIC EARNINGS PER
SHARE $ 0.22 $ 0.20 $ 0.85 $ 0.76 DILUTED EARNINGS PER SHARE
$ 0.22 $ 0.20 $ 0.84 $ 0.75 SHARES - BASIC 14,123
14,058 14,108 13,996 SHARES - DILUTED 14,370 14,201 14,303
14,201
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version on businesswire.com: http://www.businesswire.com/news/home/20161031006143/en/
Exactech, Inc.Investor contactsJody Phillips,
352-377-1140Executive Vice President of Finance & Chief
Financial OfficerorHawk AssociatesJulie Marshall or Frank Hawkins,
305-451-1888EXAC@hawkassociates.comorMedia contactPriscilla
Bennett, 352-377-1140Vice President, Corporate & Marketing
Communication
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