UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
| x | QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended March 31, 2003
| ¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number 0-28240
EXACTECH, INC.
(Exact name of registrant as specified in its charter)
| FLORIDA |
59-2603930 | |
| (State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
2320 NW 66TH COURT
GAINESVILLE, FL
32653
(Address of principal executive offices)
(352) 377-1140
(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨
Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2 of the Exchange Act). Yes ¨ No x
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
| Class |
Outstanding at May 9, 2003 | |
| Common Stock, $.01 par value
|
10,962,165 |
EXACTECH, INC.
| Page Number | ||
| PART I. FINANCIAL INFORMATION |
||
| Item 1. Financial Statements (Unaudited) |
||
| Condensed Balance Sheets as of December 31, 2002 and March 31, 2003 |
2 | |
| Condensed Statements of Income for the Three Month Periods Ended March 31, 2002 and 2003 |
3 | |
| 4 | ||
| Condensed Statements of Cash Flows for the Three Month Periods Ended March 31, 2002 and 2003 |
5 | |
| Notes to Condensed Financial Statements for the Three Month Periods Ended March 31, 2002 and 2003 |
6 | |
| Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations |
12 | |
| Item 3. Quantitative and Qualitative Disclosures About Market Risk |
15 | |
| 16 | ||
| PART II. OTHER INFORMATION |
||
| 17 | ||
| 17 | ||
| 17 | ||
| 17 | ||
| 19 | ||
| 19 | ||
| 20 | ||
| 21 |
CAUTIONARY STATEMENT RELATING TO FORWARD LOOKING STATEMENTS
This report contains various “forward looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which represent the Company’s expectations or beliefs concerning future events, including, but not limited to, statements regarding growth in sales of the Company’s products, profit margins and the sufficiency of the Company’s cash flow for its future liquidity and capital resource needs. 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, without limitation, the effect of competitive pricing, the Company’s dependence on the ability of its third-party suppliers to produce components on a cost-effective basis to the Company, market acceptance of the Company’s products, the outcome of litigation, and the effects of governmental regulation. Results actually achieved may differ materially from expected results included in these statements as a result of these or other factors, including those factors discussed in “Risk Factors” in the Company’s 2002 Annual Report on Form 10-K.
1
Item 1. Financial Statements
EXACTECH, INC.
(in thousands)
(Unaudited)
| March 31, 2003 |
December 31, 2002 |
|||||||
| ASSETS |
||||||||
| CURRENT ASSETS: |
||||||||
| Cash and cash equivalents |
$ |
3,453 |
|
$ |
3,651 |
| ||
| Trade receivables, net of allowance of $644 and $602 |
|
14,128 |
|
|
12,686 |
| ||
| Prepaid expenses and other assets, net |
|
1,605 |
|
|
750 |
| ||
| Inventories |
|
20,363 |
|
|
20,038 |
| ||
| Deferred tax assets |
|
407 |
|
|
364 |
| ||
| Total current assets |
|
39,956 |
|
|
37,489 |
| ||
| PROPERTY AND EQUIPMENT: |
||||||||
| Land |
|
865 |
|
|
865 |
| ||
| Machinery and equipment |
|
7,846 |
|
|
7,389 |
| ||
| Surgical instruments |
|
13,414 |
|
|
13,262 |
| ||
| Furniture and fixtures |
|
1,079 |
|
|
820 |
| ||
| Facilities |
|
3,597 |
|
|
3,597 |
| ||
| Facilities expansion in progress |
|
2,943 |
|
|
1,743 |
| ||
| Total property and equipment |
|
29,744 |
|
|
27,676 |
| ||
| Accumulated depreciation |
|
(10,502 |
) |
|
(9,826 |
) | ||
| Net property and equipment |
|
19,242 |
|
|
17,850 |
| ||
| OTHER ASSETS: |
||||||||
| Product licenses and designs, net |
|
352 |
|
|
363 |
| ||
| Deferred financing costs, net |
|
140 |
|
|
164 |
| ||
| Investment in joint venture |
|
76 |
|
|
86 |
| ||
| Advances and deposits |
|
7 |
|
|
7 |
| ||
| Patents and trademarks, net |
|
1,338 |
|
|
807 |
| ||
| Total other assets |
|
1,913 |
|
|
1,427 |
| ||
| TOTAL ASSETS |
$ |
61,111 |
|
$ |
56,766 |
| ||
| LIABILITIES AND SHAREHOLDERS’ EQUITY |
||||||||
| CURRENT LIABILITIES: |
||||||||
| Accounts payable |
$ |
4,091 |
|
$ |
3,758 |
| ||
| Income taxes payable |
|
612 |
|
|
343 |
| ||
| Current portion of long-term debt |
|
353 |
|
|
353 |
| ||
| Commissions payable |
|
1,245 |
|
|
1,150 |
| ||
| Royalties payable |
|
650 |
|
|
491 |
| ||
| Other liabilities |
|
943 |
|
|
450 |
| ||
| Total current liabilities |
|
7,894 |
|
|
6,545 |
| ||
| LONG-TERM LIABILITIES: |
||||||||
| Deferred tax liabilities |
|
2,234 |
|
|
1,882 |
| ||
| Long-term debt, net of current portion |
|
5,104 |
|
|
4,313 |
| ||
| Total long-term liabilities |
|
7,338 |
|
|
6,195 |
| ||
| Total liabilities |
|
15,232 |
|
|
12,740 |
| ||
| SHAREHOLDERS’ EQUITY: |
||||||||
| Common stock |
|
110 |
|
|
109 |
| ||
| Additional paid-in capital |
|
20,644 |
|
|
20,370 |
| ||
| Retained earnings |
|
25,125 |
|
|
23,547 |
| ||
| Total shareholders’ equity |
|
45,879 |
|
|
44,026 |
| ||
| TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY |
$ |
61,111 |
|
$ |
56,766 |
| ||
See notes to condensed financial statements
2
EXACTECH, INC.
CONDENSED STATEMENTS OF INCOME
(in thousands, except per share amounts)
(Unaudited)
| Three Month Periods Ended March 31, |
||||||||
| 2003 |
2002 |
|||||||
| NET SALES |
$ |
18,007 |
|
$ |
13,755 |
| ||
| COST OF GOODS SOLD |
|
5,840 |
|
|
4,889 |
| ||
| Gross profit |
|
12,167 |
|
|
8,866 |
| ||
| OPERATING EXPENSES: |
||||||||
| Sales and marketing |
|
5,438 |
|
|
3,889 |
| ||
| General and administrative |
|
2,052 |
|
|
1,142 |
| ||
| Research and development |
|
1,025 |
|
|
647 |
| ||
| Depreciation and amortization |
|
787 |
|
|
727 |
| ||
| Royalties |
|
640 |
|
|
529 |
| ||
| Total operating expenses |
|
9,942 |
|
|
6,934 |
| ||
| INCOME FROM OPERATIONS |
|
2,225 |
|
|
1,932 |
| ||
| OTHER INCOME (EXPENSE): |
||||||||
| Interest income |
|
11 |
|
|
5 |
| ||
| Litigation settlement, net of costs |
|
250 |
|
|
— |
| ||
| Interest expense |
|
(40 |
) |
|
(45 |
) | ||
| Foreign currency exchange gain |
|
6 |
|
|
— |
| ||
| Equity in net loss of joint venture |
|
(10 |
) |
|
(14 |
) | ||
| INCOME BEFORE INCOME TAXES |
|
2,442 |
|
|
1,878 |
| ||
| PROVISION FOR INCOME TAXES |
|
864 |
|
|
677 |
| ||
| NET INCOME |
$ |
1,578 |
|
$ |
1,201 |
| ||
| BASIC EARNINGS PER SHARE |
$ |
0.14 |
|
$ |
0.11 |
| ||
| DILUTED EARNINGS PER SHARE |
$ |
0.14 |
|
$ |
0.11 |
| ||
See notes to condensed financial statements
3
EXACTECH, INC.
CONDENSED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY
(in thousands)
(Unaudited)
| Common Stock |
Additional Paid-In Capital |
Retained Earnings |
Total Shareholders’ Equity | |||||||||||
| Shares |
Amount |
|||||||||||||
| Balance, December 31, 2002 |
10,902 |
$ |
109 |
$ |
20,370 |
$ |
23,547 |
$ |
44,026 | |||||
| Exercise of stock options |
56 |
|
1 |
|
190 |
|
— |
|
191 | |||||
| Issuance of com | ||||||||||||||