Exactech Posts Q4 and Full-Year Gains for 2014

Exactech Inc. reported solid fourth-quarter and full-year performance.

The Gainesville, Fla.-based firm, which makes bone and joint restoration products for hip, knee, shoulder and spine, reported fourth-quarter net income of $5.1 million. On a per-share basis, that’s a profit of 36 cents. Revenue was $63.3 million for the period.

For the year, the company reported profit of $16.5 million (a 7 percent increase), or $1.18 per share. Revenue was reported as $248.4 million, up 5 percent from $237.1 million in 2013.

For 2014, extremity implant revenue increased 21 percent to $79 million; knee implant revenue decreased 2 percent to $78.7 million; hip implant revenue increased 6 percent to $43.5 million; and biologic and spine revenues decreased 7 percent to $23.8 million.

“The major success of our shoulder business was directly attributable to excellent results that our surgeon customers continue to achieve with our Equinoxe shoulder system,” said Exactech CEO and President David Petty. “With a strong pipeline of new products and a well-established competency in the segment, we believe this will continue to be a robust business segment in 2015. Our hip business received a strong boost during the year with introduction of the Alteon brand, which features a tapered wedge femoral stem and neck-preserving femoral stem. These innovations have also produced very positive feedback from surgeons, providing us with excellent momentum going into the new year.”

Currency issues, according to Petty, had a “particularly specific impact” on the firm’s knee revenues, which represent the largest volume product that Exactech sells outside of the United States.
Knee unit sales increased on a worldwide basis during the year although revenues slipped, as pricing pressure was a factor, he added.

“Based upon new product launches, sales force engagement, sales organization development and the product development pipeline, we see a number of positives in our knee business that we expect to be beneficial in the second half of 2015,” Petty noted.

According to Petty, U.S. sales for the year were up 4 percent to $165.6 million compared with $159.6 million in 2013. International sales increased 7 percent to $82.8 million. U.S. sales represented 67 percent of total sales and international sales were 33 percent of the total. For the fourth quarter of 2014 U.S. sales remained constant at $41.7 million as compared to the fourth quarter of 2013. International sales increased 9 percent to $21.6 million for the fourth quarter of 2014, which represented 34 percent of total sales.

“Full-year gross margins increased to 70 percent compared with 69 percent for 2013 due to manufacturing cost reductions that offset some pricing pressure,” said Chief Financial Officer Jody Phillips. “Total operating expenses for the year increased 6 percent to $147.9 million and as a percentage of sales increased to 59.5 percent from 59.1 percent resulting in an operating profit increase of 10 percent to $26.3 million. Currency losses and income taxes significantly impacted our net income in the fourth quarter. The currency loss of $677,000 was partially offset by reinstatement of the Research and Development tax credit during the quarter.”

Looking forward, Exactech released its initial 2015 revenue guidance of $252 million-$260 million and diluted earnings-per-share (EPS) target of $1.20-$1.28. For the first quarter of 2015 ending in March, the company anticipates revenues of $62 million-$65 million and diluted EPS of 30-32 cents.