GAINESVILLE, Fla., July 31 /PRNewswire-FirstCall/ -- Exactech, Inc. , a developer and producer of bone and joint restoration products including orthopaedic implants and biologic materials, announced today that revenue for the second quarter of 2007 increased 19% to $31.6 million from $26.6 million in the second quarter of 2006. Diluted earnings per share for the quarter was $0.12 based on net income of $1.4 million. This compares with net income of $2.1 million or $0.18 diluted EPS a year ago.
The second quarter 2007 net income included a previously announced impairment charge of $1.5 million, which represented the current full carrying value of an asset related to the license and distribution agreement entered into during 2003 with Dimicron Corporation to develop polycrystalline diamond compact hip bearings. Excluding the impact of this impairment charge, the adjusted net income was $2.4 million or diluted earnings per share of $0.20, an increase of 15% compared to $2.1 million net income or $0.18 diluted EPS reported in the second quarter of 2006.
For the first six months of 2007, revenue was $61.2 million, an increase of 18% over $52.0 million for the comparable period last year. Also including the impairment charge taken in the second quarter, net income for the first six months was $3.3 million, or $0.28 per diluted share, compared to $3.7 million, or $0.31 per diluted share in the first half of 2006.
Exactech Chairman and CEO Bill Petty said, "Sales grew in all product lines during the quarter reflecting the acceptance of our new products and continuing success of our products across all segments. Our shoulder product sales, which we will now begin to report separately on a regular basis, jumped 86% from $1.3 million in the second quarter of 2006 to $2.3 million in the second quarter of 2007. Sales for this business unit increased 63% to $3.9 million for the first six months of 2007, compared to $2.4 million for the first six months of 2006. Sales of knee products, our largest business unit, increased 17% to $16.9 million from $14.4 million in the same quarter of 2006, and increased 15% from $28.3 million in the first six months of 2006 to $32.6 million for the first six months of this year. Hip product sales rose 18% to $5.4 million, compared with $4.6 million in the second quarter of 2006, and increased 30% to $10.9 million for the first six months of 2007, compared to $8.4 million for the first six months of 2006. Revenue from biologics increased 33% to $3.9 million during the quarter, up from $3.0 million in Q2 '06 as we continued to see good results from our dental biologics and Optecure(R) lines. For the first six months of 2007, revenue from biologics increased 17% to $7.4 million, compared to $6.3 million for the first six months of 2006."
Petty said, "U.S. sales grew 16% to $23.3 million from $20.1 million in the comparable quarter in 2006 while our international business remained consistently strong with sales increasing 28% to $8.3 million from $6.5 million in the second quarter of 2006.
We continue to anticipate a healthy second half of 2007. Our flagship Optetrak(R) knee system is benefiting from the roll-out of the Ligament Balancing System and Low Profile Instrumentation, as well as the expansion of our Rotating Bearing Knee system outside of the U.S. Our Novation hip system has driven the sales increases in our hip business unit, and we anticipate the roll out of our ceramic on ceramic bearing product line extension to continue to fuel hip growth. We are pleased with the rapid surgeon acceptance of our Equinoxe shoulder system.
"Our Biologics division continues to benefit from market penetration of Optecure(TM) and the introduction of our Accelerate(TM) platelet concentrating system. The Accelerate system is proving to be popular with a broad group of surgeons," Petty said.
Chief Financial Officer Jody Phillips said, "Gross margin percentage for the quarter increased slightly to 62.7% compared to 62.5% for the comparable quarter last year as we continued to increase internal manufacturing to leverage our product costs. Total operating expenses in the quarter were $17.3 million, up 38% from $12.6 million in the comparable quarter last year. Operating expenses include the $1.5 million impairment charge announced on July 12. Excluding the impairment charge, operating expenses were $15.8 million, or up 25% from the second quarter last year, which was in line with our expectations for the quarter."
Looking forward, the company said its target for diluted earnings per share in the third quarter ending September 30, 2007 is in the range of $0.17 to $0.18 based on anticipated revenues of $27 million to $29 million. The company's target range for 2007 revenue is $115 million to $120 million with diluted EPS of $0.64 to $0.68 including the $0.08 impact of the impairment charge. 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 company has scheduled a conference call on Wednesday, August 1 at 9:00 a.m. Eastern Daylight Saving Time. To participate, call (888) 595-4228 any time after 8:50 a.m. Eastern on Aug. 1. International and local callers should dial (480) 293-1744. While in conference, if callers should experience any difficulty or require operator assistance, they can press the (*) followed by the (0) button. This will call an operator to the line.
A live webcast of the call will be available at http://viavid.net/dce.aspx?sid=00004220. A podcast will be available approximately 15 minutes after the event ends and can be accessed at http://viavid.net/mp3/00004220.mp3. Both will be archived for approximately 90 days.
The financial statements follow.
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 and Australia, and in more than 25 countries in Europe, Asia and Latin America. 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/exacprofile.aspx. Questions should be directed to Frank Hawkins or Julie Marshall of Hawk Associates, Inc. at (305) 451-1888, e-mail: info@hawkassociates.com.
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 CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands) (unaudited) (audited) June 30, December 31, 2007 2006 ASSETS CURRENT ASSETS: Cash and cash equivalents $800 $2,006 Accounts receivable, net of allowances of $849 and $572 22,271 17,524 Prepaid expenses and other assets, net 1,471 1,325 Income taxes receivable 505 219 Inventories - current 44,966 38,742 Deferred tax assets 483 271 Total current assets 70,496 60,087 PROPERTY AND EQUIPMENT: Land 1,140 1,015 Machinery and equipment 15,307 14,851 Surgical instruments 29,022 26,189 Furniture and fixtures 2,238 2,078 Facilities 11,196 10,481 Projects in process 724 - Total property and equipment 59,627 54,614 Accumulated depreciation (25,081) (22,386) Net property and equipment 34,546 32,228 OTHER ASSETS: Notes receivable - related party 3,882 2,904 Other investments 219 398 Deferred financing and deposits, net 731 694 Non-current inventory 2,236 11,679 Product licenses and designs, net 1,214 994 Patents and trademarks, net 2,311 3,938 Goodwill 352 352 Total other assets 10,945 20,959 TOTAL ASSETS $115,987 $113,274 LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable $8,174 $5,621 Income taxes payable - 113 Accrued expenses and other liabilities 5,291 4,573 Line of credit 7,418 - Current portion of long-term debt 1,635 1,633 Total current liabilities 22,518 11,940 LONG-TERM LIABILITIES: Deferred tax liabilities 2,386 2,620 Line of credit - 11,116 Long-term debt, net of current portion 9,951 10,668 Other long-term liabilities - 7 Total long-term liabilities 12,337 24,411 Total liabilities 34,855 36,351 SHAREHOLDERS' EQUITY: Common stock 116 115 Additional paid-in capital 25,980 25,105 Accumulated other comprehensive loss 35 (5) Retained earnings 55,001 51,708 Total shareholders' equity 81,132 76,923 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $115,987 $113,274 EXACTECH, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (in thousands, except per share amounts) (Unaudited) Three Month Periods Six Month Periods Ended June 30, Ended June 30, 2007 2006 2007 2006 NET SALES $31,559 $26,565 $61,155 $ 51,976 COST OF GOODS SOLD 11,760 9,965 22,621 18,937 Gross profit 19,799 16,600 38,534 33,039 OPERATING EXPENSES: Sales and marketing 9,299 7,185 18,415 15,071 General and administrative 2,936 2,304 5,906 4,865 Research and development 2,011 1,663 3,710 3,204 Impairment loss 1,519 - 1,519 - Depreciation and amortization 1,533 1,421 3,015 2,832 Total operating expenses 17,298 12,573 32,565 25,972 INCOME FROM OPERATIONS 2,501 4,027 5,969 7,067 OTHER INCOME (EXPENSE): Interest income 85 52 154 95 Interest expense (347) (581) (767) (1,077) Foreign currency exchange loss (27) (36) (48) (46) Total other expenses (289) (565) (661) (1,028) INCOME BEFORE INCOME TAXES 2,212 3,462 5,308 6,039 PROVISION FOR INCOME TAXES 692 1,330 1,836 2,267 INCOME BEFORE EQUITY IN NET OF OTHER INVESTMENTS LOSS 1,520 2,132 3,472 3,772 EQUITY IN NET LOSS OF OTHER INVESTMENTS (107) (50) (179) (114) NET INCOME $1,413 $2,082 $3,293 $3,658 BASIC EARNINGS PER SHARE $0.12 $0.18 $0.29 $0.32 DILUTED EARNINGS PER SHARE $0.12 $0.18 $0.28 $0.31 Adjusted net income and diluted earnings per share to exclude the effect of the asset impairment charge: Net Income $1,413 $3,293 Adjustments for impairment charges Impairment loss, pre-tax 1,519 1,519 Income tax benefit 542 542 977 977 Adjusted net income - excluding impairment charge $2,390 $4,270 Diluted earnings per share $0.12 $0.28 Adjustment of impairment charge, net 0.08 0.08 Adjusted diluted earnings per share $0.20 $0.36
Exactech, Inc.CONTACT: Investors, Frank N. Hawkins, Jr. or Julie Marshall, both of HawkAssociates, Inc., +1-305-451-1888, info@hawkassociates.com
