2008 Highlights and Segment Performance

Revenue for the year increased 30% to $161.7 million

Knee implant revenue increased 15% to $72.6 million

Hip implant revenue increased 1% to $22.8 million

Organic hip implant revenue increased 23% excluding the impact of a hip distribution agreement terminated in 2007

Biologic & spine segment revenues increased 63% to $26.5 million, which includes revenues of $7.2 million from the spine acquisition

Shoulder implant revenue increased 77% to $16.8 million

Other revenue of $23.0 million increased 85% from $12.5 million primarily due to revenue from the acquired French distributor

For the fourth quarter of 2008, revenue was $40.3 million, an increase of 22% over $33.1 million for the fourth quarter last year. Net income for the fourth quarter of 2008 was up 15% to $3.1 million compared to $2.7 million for the same quarter of 2007. Diluted EPS was $0.24 for the fourth quarter of 2008 compared to $0.23 in the fourth quarter of 2007. Excluding legal costs of $391,000 associated with the ongoing DOJ inquiry, diluted EPS for the fourth quarter of 2008 was $0.26.

Exactech chairman and chief executive officer Bill Petty said, “This was another strong year for Exactech. We had solid double-digit growth in all lines of business, with overall revenue increasing 30% to $161.7 million. With the combining of our biologic and spine divisions led by seasoned orthopaedic executive Bruce Thompson, we will be reporting biologic and spine revenues together as one segment. Revenues for this segment totaled $26.5 million in 2008, which includes revenue of $7.2 million from spine products.

“For the fourth quarter, we had improvement in all major segments. Knee sales increased 3% to $17.0 million. Organic hip sales were up 17% to $5.3 million. Upper extremity sales grew 57% to $5.0 million, biologics/spine increased 13% to $5.2 million excluding the impact of the spine acquisition.

“Our strategy for growth has become evident with the accomplishments of 2008. Exactech is building a platform to drive future growth through broadened product lines, significant industry expertise, and geographical expansion. Exactech Spine provides a base portfolio of spine products with the opportunity to expand distribution domestically and internationally. We also signed a license agreement for cartilage repair technology and, although work on this project is still in the early stages, pursuing cartilage repair underscores our long-term commitment to developing biologic solutions for joint restoration.

“We continue to expand our product lines. In 2008 we launched six new products including our Novation® Crown Cup acetabular system and the Novation® Element™ stem for our Novation Comprehensive Hip system. We introduced our patent-pending CR slope knee system for Optetrak® knee, which is already receiving strong support from surgeons in clinical trials.

“A key element to Exactech’s growth strategy is our highly experienced management team. We were fortunate to have Daniel Berdat join us last April as VP, international sales and marketing. Daniel’s leadership has been an important catalyst as we expanded internationally in 2008,” Petty said.

Exactech president David Petty said “Geographic expansion continues to deliver strong results for Exactech. For the full year 2008, U.S. sales grew 16% to $112.4 million from $96.5 million in 2007. Our international business again reported strong performance with sales increasing 78% to $49.3 million in 2008 from $27.7 million in 2007. Excluding the impact of our French distributor acquisition, international sales increased 39% during 2008.

“For the fourth quarter of 2008, U.S. sales increased 12% to $29.0 million, and international sales were up 59% to $11.3 million. International sales represented 28% of total sales, compared with 22% for the same quarter last year.”

Jody Phillips, Exactech chief financial officer, said, “Gross margin percentage for the year decreased to 63.8% compared to 64.8% for last year which was consistent with our expectations due to the impact of the international sales mix. Total operating expenses in 2008 were $84.6 million, up 29% from $65.5 million in the comparable period last year. The significant increase in operating expenses was primarily due to the addition of the distribution costs from acquisitions and higher legal expenses.”

Looking forward, the company reiterated its 2009 revenue guidance of $184 – $194 million and diluted EPS of $1.06 – $1.14 excluding the impact of DOJ expenses. For the first quarter of 2009, the company said it anticipates revenues of $42 – $45 million and diluted EPS of $0.24 – $0.26 excluding the impact of DOJ related expenses.