News Column

Exactech Releases 2013 Year-over-Year Revenue

February 24, 2014

Exactech, Inc., a developer and producer of bone and joint restoration products for hip, knee, shoulder and spine, announced that revenue for 2013 increased 6 percent to $237.1 million from $224.3 million in 2012.

In a release on February 19, the Company noted that diluted earnings per share for the year was $1.12 based on net income of $15.4 million, representing a 21 percent increase compared to net income of $12.7 million or $0.96 diluted earnings per share during 2012.

2013 Full Year Highlights and Segment Performance

-Revenue for the year increased 6 percent to $237.1 million

-Knee implant revenue decreased 1 percent to $80.5 million

-Extremity implant revenue increased 26 percent to $65.5 million

-Hip implant revenue increased 0.3 percent to $41.0 million

-Biologic & spine revenues increased 4 percent to $25.5 million

-Other revenues decreased 4 percent to $24.6 million

2013 Fourth Quarter Highlights and Segment Performance

For the fourth quarter of 2013 revenue was $61.6 million, an increase of 4 percent over $59.3 million for the comparable period last year. Net income for the fourth quarter of 2013 increased 18 percent to $4.6 million, or $0.33 per diluted share, compared to $3.9 million, or $0.29 per diluted share, for the fourth quarter of 2012. Fourth quarter total and segment revenues were as follows:

-Total revenue for the quarter increased 4 percent to $61.6 million

-Knee implant revenue decreased 2 percent to $20.4 million

-Extremity implant revenue increased 24 percent to $18.4 million

-Hip implant revenue decreased 2 percent to $10.1 million

-Biologic & spine revenues increased 3 percent to $6.6 million

-Other revenues decreased 13 percent to $6.0 million

Management Comment

Exactech Chairman and CEO Dr. Bill Petty said, "Overall, we are pleased with these results despite some international economic challenges. Our extremities segment drove the top line with a 26 percent gain to $65.5 million in 2013. Our domestic knee sales did well, and we were encouraged by improvements in our biologic and spine segment. Our 21 percent improvement in net income was particularly satisfying, as the people of Exactech worked effectively and efficiently to hold down costs and improve productivity. Looking ahead, our new product pipeline should provide fresh top line momentum in 2014. In addition, we expect our focus on increased productivity and lower costs will continue to contribute to net income growth."

Exactech President David Petty said, "For the year 2013, U.S. sales increased 10 percent to $159.7 million, and international sales were down 2 percent to $77.4 million. During the fourth quarter, U.S. sales increased 9 percent to $41.8 million. International sales decreased 5 percent to $19.8 million.

"Our domestic knee product sales did well in the fourth quarter, providing us with good momentum going into 2014. We have increased the number of active trials of our new ExactechGPS guided personalized surgery system, and that is already driving new knee sales to surgeons. Based on surgeon feedback, we are encouraged about the future impact of the system as a sales catalyst for our knee results. Our extremities business continues to be a growth leader both domestically and internationally. Our surgeon customers repeatedly report excellent patient outcomes, and that is playing an important role in propelling this segment."

"Our hip business did well internationally but faced some challenges domestically after a particularly strong year in 2012. We are very pleased with improvements in our biologics and spine segment where we are seeing strong growth in the spine portion."

Chief Financial Officer Jody Phillips said, "Operationally, we made significant improvements during 2013. Gross margins remained flat at 69 percent for 2013 and 2012 due to continued focus on maintaining cost reductions that offset the impact of the medical device excise tax. Total operating expenses for the year increased 4 percent to $140.1 million, and as a percentage of sales decreased to 59.1 percent from 59.8 percent for 2012. General and administrative expenses increased 5 percent for 2013 to $21.1 million from $20.1 million. Sales and marketing expenses increased 4 percent to $85.0 million, primarily due to variable selling expenses. Research and development expenses increased 6 percent to $17.8 million during 2013, as we continue to actively invest in our new product pipeline."

Looking forward, Exactech released its initial 2014 revenue guidance of $246-$254 million and diluted EPS target of $1.18- $1.24. For the first quarter of 2014, the company anticipates revenues of $62-$64 million and diluted EPS of $0.28-$0.30. 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.

Exactech develops and markets orthopaedic implant devices, related surgical instruments and biologic materials and services to hospitals and physicians.

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