UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
| x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended March 31, 2004
| ¨ | 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 Rule 12b-2 of the Exchange Act). Yes x No ¨
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 7, 2004 | |
| Common Stock, $.01 par value | 11,107,071 |
INDEX
| Page Number | ||||
| PART I. FINANCIAL INFORMATION |
||||
| Item 1. |
2 | |||
| Condensed Balance Sheets as of March 31, 2004 and December 31, 2003 |
2 | |||
| Condensed Statements of Income for the Three Month Periods Ended March 31, 2004 and March 31, 2003 |
3 | |||
| 4 | ||||
| 5 | ||||
| 6 | ||||
| Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
11 | ||
| Item 3. |
16 | |||
| Item 4. |
16 | |||
| 17 | ||||
| Item 1. |
17 | |||
| Item 2. |
Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities |
17 | ||
| Item 3. |
17 | |||
| Item 4. |
17 | |||
| Item 5. |
17 | |||
| Item 6. |
17 | |||
| 18 | ||||
1
CONDENSED BALANCE SHEETS
(in thousands)
(Unaudited)
| March 31, 2004 |
December 31, 2003 |
|||||||
| ASSETS |
||||||||
| CURRENT ASSETS: |
||||||||
| Cash and cash equivalents |
$ | 1,923 | $ | 3,506 | ||||
| Trade receivables, net of allowance of $605 and $782 |
16,031 | 13,577 | ||||||
| Income taxes receivable |
— | 40 | ||||||
| Prepaid expenses and other assets, net |
1,692 | 938 | ||||||
| Inventories |
25,757 | 24,824 | ||||||
| Deferred tax assets |
523 | 479 | ||||||
| Total current assets |
45,926 | 43,364 | ||||||
| PROPERTY AND EQUIPMENT: |
||||||||
| Land |
865 | 865 | ||||||
| Machinery and equipment |
9,773 | 8,720 | ||||||
| Surgical instruments |
15,155 | 14,330 | ||||||
| Furniture and fixtures |
1,701 | 1,635 | ||||||
| Facilities |
7,998 | 7,968 | ||||||
| Total property and equipment |
35,492 | 33,518 | ||||||
| Accumulated depreciation |
(11,948 | ) | (11,117 | ) | ||||
| Net property and equipment |
23,544 | 22,401 | ||||||
| OTHER ASSETS: |
||||||||
| Product licenses and designs, net |
300 | 309 | ||||||
| Deferred financing costs, net |
140 | 138 | ||||||
| Other investments |
1,027 | 1,062 | ||||||
| Advances and deposits |
633 | 428 | ||||||
| Patents and trademarks, net |
2,592 | 2,636 | ||||||
| Total other assets |
4,692 | 4,573 | ||||||
| TOTAL ASSETS |
$ | 74,162 | $ | 70,338 | ||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY |
||||||||
| CURRENT LIABILITIES: |
||||||||
| Accounts payable |
$ | 5,537 | $ | 5,272 | ||||
| Income taxes payable |
547 | — | ||||||
| Current portion of long-term debt |
815 | 590 | ||||||
| Commissions payable |
1,596 | 1,540 | ||||||
| Royalties payable |
661 | 526 | ||||||
| Other liabilities |
1,307 | 1,814 | ||||||
| Total current liabilities |
10,463 | 9,742 | ||||||
| LONG-TERM LIABILITIES: |
||||||||
| Deferred tax liabilities |
2,981 | 2,790 | ||||||
| Long-term debt, net of current portion |
7,317 | 6,499 | ||||||
| Total long-term liabilities |
10,298 | 9,289 | ||||||
| Total liabilities |
20,761 | 19,031 | ||||||
| SHAREHOLDERS’ EQUITY: |
||||||||
| Common stock |
110 | 110 | ||||||
| Additional paid-in capital |
21,352 | 21,149 | ||||||
| Retained earnings |
31,939 | 30,048 | ||||||
| Total shareholders’ equity |
53,401 | 51,307 | ||||||
| TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY |
$ | 74,162 | $ | 70,338 | ||||
See notes to condensed financial statements
2
CONDENSED STATEMENTS OF INCOME
(in thousands, except per share amounts)
(Unaudited)
| Three Month Periods Ended March 31, |
||||||||
| 2004 |
2003 |
|||||||
| NET SALES |
$ | 20,977 | $ | 18,007 | ||||
| COST OF GOODS SOLD |
6,952 | 5,840 | ||||||
| Gross profit |
14,025 | 12,167 | ||||||
| OPERATING EXPENSES: |
||||||||
| Sales and marketing |
6,088 | 5,438 | ||||||
| General and administrative |
2,285 | 2,052 | ||||||
| Research and development |
1,061 | 1,025 | ||||||
| Depreciation and amortization |
949 | 787 | ||||||
| Royalties |
620 | 640 | ||||||
| Total operating expenses |
11,003 | 9,942 | ||||||
| INCOME FROM OPERATIONS |
3,022 | 2,225 | ||||||
| OTHER INCOME (EXPENSE): |
||||||||
| Interest income |
6 | 11 | ||||||
| Litigation settlement, net of costs |
— | 250 | ||||||
| Interest expense |
(57 | ) | (40 | ) | ||||
| Foreign currency exchange gain |
40 | 6 | ||||||
| Equity in net loss of other investments |
(102 | ) | (10 | ) | ||||
| INCOME BEFORE INCOME TAXES |
2,909 | 2,442 | ||||||
| PROVISION FOR INCOME TAXES |
1,018 | 864 | ||||||
| NET INCOME |
$ | 1,891 | $ | 1,578 | ||||
| BASIC EARNINGS PER SHARE |
$ | 0.17 | $ | 0.14 | ||||
| DILUTED EARNINGS PER SHARE |
$ | 0.16 | $ | 0.14 | ||||
See notes to condensed financial statements
3
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, 2003 |
11,019 | $ | 110 | $ | 21,149 | $ | 30,048 | $ | 51,307 | |||||
| Exercise of stock options |
15 | 78 | 78 | |||||||||||
| Issuance of common stock under the Company’s Employee Stock Purchase Plan |
4 | 56 | 56 | |||||||||||
| Compensation benefit of non-qualified stock options |
69 | 69 | ||||||||||||
| Net income |
1,891 | 1,891 | ||||||||||||
| Balance, March 31, 2004 |
11,038 | $ | 110 | $ | 21,352 | $ | 31,939 | $ | 53,401 | |||||
See notes to condensed financial statements
4
CONDENSED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
| Three Month Periods Ended March 31, |
||||||||
| 2004 |
2003 |
|||||||
| OPERATING ACTIVITIES: |
||||||||
| Net income |
$ | 1,891 | $ | 1,578 | ||||
| Adjustments to reconcile net income to net cash (used in) provided by operating activities: |
||||||||
| Depreciation and amortization |
1,050 | 851 | ||||||
| Compensation benefit on non-qualified stock options |
69 | 50 | ||||||
| Loss (gain) on disposal of equipment |
42 | (59 | ) | |||||
| Foreign currency exchange gain |
(40 | ) | (6 | ) | ||||
| Equity in net loss of other investments |
102 | 10 | ||||||
| Deferred income taxes |
147 | 309 | ||||||
| Increase in trade receivables |
(2,454 | ) | (1,442 | ) | ||||
| Increase in inventories |
(933 | ) | (325 | ) | ||||
| Increase in prepaids and other assets |
(961 | ) | (831 | ) | ||||
| Increase in accounts payable |
305 | 339 | ||||||
| Increase in income taxes payable |
587 | 269 | ||||||
| (Decrease) increase in other liabilities |
(316 | ) | 747 | |||||
| Net cash (used in) provided by operating activities |
(511 | ) | 1,490 | |||||
| INVESTING ACTIVITIES: |
||||||||
| Proceeds from the sale of property and equipment |
8 | 84 | ||||||
| Purchases of property and equipment |
(2,179 | ) | (2,238 | ) | ||||
| Other investments |
(67 | ) | — | |||||
| Cost of patents and trademarks |
(11 | ) | (550 | ) | ||||
| Net cash used in investing activities |
(2,249 | ) | (2,704 | ) | ||||
| FINANCING ACTIVITIES: |
||||||||
| Principal payments on debt |
(53 | ) | — | |||||
| Proceeds from commercial construction loan |
— | 791 | ||||||
| Proceeds from commercial equipment loan |
1,096 | — | ||||||
| Proceeds from issuance of common stock |
134 | </ | ||||||