Exactech, Inc. (Exactech), an orthopedic devices company, has reported revenues of $43.3 million for the first quarter of 2009, up 9%, compared to revenues of $39.8 million in the year-ago quarter. It reported a net income of $2.5 million or $0.19 per diluted share for the first quarter of 2009, compared with a net income of $2.8 million or $0.23 per diluted share, in the year-ago quarter.
Net income for the quarter, excluding pre-tax legal expenses and costs of $1.4 million related to the ongoing Department of Justice (DOJ) inquiry, was $3.3 million or $0.26 EPS.
First Quarter Highlights and Segment Performance
Knee implant revenue remained unchanged at $18.5 million
Hip implant revenue increased 3% to $6.5 million
Biologic and Spine revenue increased 6% to $7.1 million
Extremity implant revenue increased 57% to $5.8 million
Other products revenue increased 19% to $5.4 million, including $2.3 million of other revenue from our French distributor acquired in April 2008
Exactech chairman and chief executive officer Bill Petty said, “Our financial results for the quarter were within our expectations as our company performed well in a challenging economic environment. The slowdown in our major segments was offset by strong results in our extremity revenues and continued favorable comparisons in international sales.
“Sales from knee implants remained unchanged at $18.5 million for the first quarter of 2009. Hip implant sales for the first quarter were $6.5 million, a 3% increase from revenue of $6.4 million in the first quarter of 2008, due to domestic strength in our Novation® hip products. Biologic-spine revenue was up 6% to $7.1 million from $6.7 million in the same quarter last year. Extremity revenues increased to $5.8 million, a 57% increase from last year’s revenue of $3.7 million, as a result of the continued momentum of our Equinoxe® shoulder products. Other products increased 19% to $5.4 million.”
Exactech President David Petty said, “Continued progress of our French distributor was the primary driver behind a 9% increase in international sales to $12.5 million from $11.5 million in the first quarter of 2008. International sales for the quarter remained at 29% of total sales, identical with last year. U.S. sales increased 9% to $30.8 million compared with $28.3 million in the first quarter of 2008.”
Chief Financial Officer Jody Phillips said, “Net income for the quarter was down 12% to $2.5 million from $2.8 million in the same quarter last year primarily due to legal costs that masked a solid operating performance. During the quarter, legal and other expenses related to the DOJ inquiry were $874,000, net of tax, compared to $188,000 of DOJ-related expenses in the first quarter of 2008. Excluding the impact of the DOJ-related expenses, our net income increased 12%. Gross margins increased to 66.5% in 2009 from 62.9% in 2008, primarily as a result of a stable mix of domestic and international sales and continued benefit from our internal manufacturing cost reduction efforts.
“Total operating expenses for the quarter were $24.7 million, an increase of 20% from $20.6 million in the comparable period. As a percentage of sales, operating expenses increased to 57% from 52% for 2008. Total sales and marketing expenses were up 18%, and increased to 34% as a percentage of sales from 31% during 2008. General and administrative expenses including DOJ-related expenses of $1.4 million increased 29% in the first quarter to $5.1 million from $3.9 million during the first quarter of 2008. Research and development expenses increased 12% to $2.9 million from $2.6 million in the first quarter of 2008, reflecting our continuing focus on development of products.”
Looking forward, Exactech updated its revenue targets for 2009 to a range of $176 million to $184 million and diluted earnings per share for the year 2009 in the range of $1.02 to $1.08. For the second quarter ending June 30, 2009, the company targets revenue in the range of $44 million to $46 million and diluted earnings per share in the range of $0.26 to $0.28. These EPS target ranges exclude the impact of DOJ inquiry costs. 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.