GAINESVILLE, Fla.--(BUSINESS WIRE)--Exactech, Inc. (Nasdaq: EXAC), a developer and producer of bone and joint restoration products and biologic solutions for extremities, knee and hip, announced today that revenue for the third quarter of 2017 increased 2% to $61.4 million from $59.9 million in the third quarter of 2016, and 2% on a constant currency basis. Domestic revenue increased 2% to $43.3 million, and international revenue increased 2% to $18.1 million in the third quarter of 2017. Diluted earnings per share for the third quarter was $0.20 based on net income of $2.9 million, compared to third quarter 2016 net income of $3.2 million and diluted earnings per share of $0.22.
Third Quarter Segment Performance
- Extremities revenue increased 18% to $27.7 million from $23.4 million, an 18% constant currency increase
- Knee revenue decreased 3% to $16.5 million, a 3% constant currency decrease
- Hip revenue decreased 3% to $11.3 million from $11.6 million, a 3% constant currency decrease
- Other revenue decreased 25% to $5.9 million from $7.9 million, a 27% constant currency decrease. The Other segment includes an aggregation of the former Biologics and Spine segment
Nine Months Highlights and Segment Performance
For the first nine months of 2017, revenue was $198.2 million, an increase of 4% over $191.3 million for the comparable period last year. On a constant currency basis, revenue for the first nine months of 2017 was up 4%. Net income for the first nine months of 2017 was $12.3 million, or $0.84 per diluted share compared to $12.0 million, or $0.84 per diluted share, for the first nine months of 2016. First nine month product revenue was as follows:
- Extremities revenue increased 19% to $87.1 million, a 19% constant currency increase
- Knee revenue was flat at $56.2 million, flat on constant currency
- Hip revenue decreased 2% to $35.0 million, a 1% constant currency decrease
- Other revenue decreased 24% to $20.0 million, a 24% constant currency decrease
Management Comment
Exactech CEO and President David Petty said, “For the first nine months of 2017, we reported a 4% increase in our revenue. During the third quarter, we continued to work on launch plans for the new Truliant® knee system, Vantage® ankle, ExactechGPS® shoulder application, and Alteon® H.A. hip stem and are very pleased with the early response we hear from surgeon users,” Petty said.
Chief Financial Officer Jody Phillips said, “Gross margins increased to 70.3% from 68.7% for the third quarter a year ago. Total operating expenses for the quarter increased 7% to $39.2 million. As a result, our net income decreased 10% to $2.9 million and $0.20 diluted EPS for the third quarter which was in the range of our expectations.”
On October 23, 2017, Exactech announced that it had entered into a definitive agreement with TPG Capital to go private. It is expected the transaction will be closed in early 2018.
The financial statements are below.
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 can be found at http://www.exac.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.
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EXACTECH, INC. AND SUBSIDIARIES |
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| CONSOLIDATED BALANCE SHEETS | |||||||
| (in thousands) | |||||||
| (unaudited) | (audited) | ||||||
| September 30, | December 31, | ||||||
| 2017 | 2016 | ||||||
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ASSETS |
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| CURRENT ASSETS: | |||||||
| Cash and cash equivalents | $ | 11,718 | $ | 13,052 | |||
| Trade receivables, net of allowances of $2,043 and $1,473 | 56,940 | 53,051 | |||||
| Prepaid expenses and other assets, net | 3,585 | 3,075 | |||||
| Income taxes receivable | 895 | 2,140 | |||||
| Inventories, current | 69,885 | 65,264 | |||||
| Assets held for sale | — | 6,477 | |||||
| Total current assets | 143,023 | 143,059 | |||||
| PROPERTY AND EQUIPMENT: | |||||||
| Land | 4,550 | 4,474 | |||||
| Machinery and equipment | 45,622 | 42,034 | |||||
| Surgical instruments | 146,827 | 132,134 | |||||
| Furniture and fixtures | 4,715 | 4,700 | |||||
| Facilities | 23,062 | 21,726 | |||||
| Projects in process | 6,739 | 2,473 | |||||
| Total property and equipment | 231,515 | 207,541 | |||||
| Accumulated depreciation | (111,434 | ) | (100,234 | ) | |||
| Net property and equipment | 120,081 | 107,307 | |||||
| OTHER ASSETS: | |||||||
| Deferred financing, deposits and other | 4,416 | 968 | |||||
| Equity investment | 1,916 | 2,047 | |||||
| Deferred tax asset | — | 887 | |||||
| Non-current inventory | 12,799 | 15,723 | |||||
| Product licenses and designs, net | 8,994 | 9,102 | |||||
| Patents and trademarks, net | 664 | 821 | |||||
| Customer relationships, net | 452 | 476 | |||||
| Goodwill | 14,860 | 13,819 | |||||
| Total other assets | 44,101 | 43,843 | |||||
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TOTAL ASSETS |
$ | 307,205 | $ | 294,209 | |||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | |||||||
| CURRENT LIABILITIES: | |||||||
| Accounts payable | $ | 18,338 | $ | 17,566 | |||
| Income taxes payable | 568 | 780 | |||||
| Accrued expenses | 13,547 | 11,832 | |||||
| Other current liabilities | 2,616 | 2,927 | |||||
| Total current liabilities | 35,069 | 33,105 | |||||
| LONG-TERM LIABILITIES: | |||||||
| Deferred tax liabilities | 4,181 | 1,773 | |||||
| Long-term debt, net of current portion | 14,000 | 20,000 | |||||
| Other long-term liabilities | 3,653 | 5,089 | |||||
| Total long-term liabilities | 21,834 | 26,862 | |||||
| Total liabilities | 56,903 | 59,967 | |||||
| COMMITMENTS AND CONTINGENCIES | |||||||
| SHAREHOLDERS’ EQUITY: | |||||||
| Common stock | 145 | 144 | |||||
| Additional paid-in capital | 91,051 | 87,319 | |||||
| Treasury Stock | (3,042 | ) | (3,042 | ) | |||
| Accumulated other comprehensive loss, net of tax | (8,561 | ) | (8,611 | ) | |||
| Retained earnings | 170,709 | 158,432 | |||||
| Total shareholders’ equity | 250,302 | 234,242 | |||||
| TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | $ | 307,205 | $ | 294,209 | |||
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EXACTECH, INC. AND SUBSIDIARIES |
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| CONDENSED CONSOLIDATED STATEMENTS OF INCOME | ||||||||||||||||
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(in thousands, except per share amounts) |
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| (Unaudited) | ||||||||||||||||
| Three Month Periods | Nine Month Periods | |||||||||||||||
| Ended September 30, | Ended September 30, | |||||||||||||||
| 2017 | 2016 | 2017 | 2016 | |||||||||||||
| NET SALES | $ | 61,404 | $ | 59,919 | $ | 198,213 | $ | 191,341 | ||||||||
| COST OF GOODS SOLD | 18,232 | 18,772 | 59,927 | 59,408 | ||||||||||||
| Gross profit | 43,172 | 41,147 | 138,286 | 131,933 | ||||||||||||
| OPERATING EXPENSES: | ||||||||||||||||
| Sales and marketing | 22,713 | 21,684 | 71,335 | 68,838 | ||||||||||||
| General and administrative | 5,908 | 5,186 | 18,065 | 16,740 | ||||||||||||
| Research and development | 5,729 | 5,096 | 17,333 | 15,495 | ||||||||||||
| Depreciation and amortization | 4,892 | 4,592 | 14,283 | 13,326 | ||||||||||||
| Total operating expenses | 39,242 | 36,558 | 121,016 | 114,399 | ||||||||||||
| INCOME FROM OPERATIONS | 3,930 | 4,589 | 17,270 | 17,534 | ||||||||||||
| OTHER INCOME (EXPENSE): | ||||||||||||||||
| Interest income | 32 | 29 | 87 | 35 | ||||||||||||
| Other income (loss) | (28 | ) | 43 | 300 | 115 | |||||||||||
| Interest expense | (229 | ) | (186 | ) | (693 | ) | (716 | ) | ||||||||
| Foreign currency exchange gain | 470 | 73 | 1,200 | 665 | ||||||||||||
| Total other income (expenses) | 245 | (41 | ) | 894 | 99 | |||||||||||
| INCOME BEFORE INCOME TAXES | 4,175 | 4,548 | 18,164 | 17,633 | ||||||||||||
| PROVISION FOR INCOME TAXES | 1,277 | 1,383 | 5,756 | 5,680 | ||||||||||||
| INCOME BEFORE EQUITY IN LOSS OF INVESTEE | 2,898 | 3,165 | 12,408 | 11,953 | ||||||||||||
| EQUITY IN LOSS OF INVESTEE, NET OF TAX | (36 | ) | — | (131 | ) | — | ||||||||||
| NET INCOME | $ | 2,862 | $ | 3,165 | $ | 12,277 | $ | 11,953 | ||||||||
| BASIC EARNINGS PER SHARE | $ | 0.20 | $ | 0.22 | $ | 0.86 | $ | 0.85 | ||||||||
| DILUTED EARNINGS PER SHARE | $ | 0.20 | $ | 0.22 | $ | 0.84 | $ | 0.84 | ||||||||
| SHARES - BASIC | 14,352 | 14,123 | 14,315 | 14,108 | ||||||||||||
| SHARES - DILUTED | 14,613 | 14,370 | 14,578 | 14,303 | ||||||||||||
