Exactech Q2 Revenue Up 17% to $23.9M; Net Income $1.9M or $0.16 EPS

Gainesville, FL, July 26, 2005 -- Exactech, Inc. (NASDAQ: EXAC) announced today that revenue for the second quarter of 2005 increased 17% to $23.9 million from $20.4 million in the second quarter of 2004. Diluted earnings per share for the quarter were $0.16 based on net income of $1.9 million, which was equivalent to the second quarter of 2004.

For the first six months of 2005, revenue was $46.5 million, an increase of 12% over revenue of $41.4 million in the first six months of 2004. Net income for the first six months was $3 million or $0.27 per diluted share, a decrease of 20% from $3.8 million or $0.33 per diluted share in the first half of 2004.

Exactech Chairman and CEO Bill Petty said, “We are pleased with our increase in sales growth during the second quarter. A combination of sales and marketing efforts and a focus on supply chain issues yielded an increase in growth rates in both the Optetrak® knee and our hip product lines compared to the first quarter. Knee sales during the second quarter increased 11% to $13.8 million from $12.4 million in the same quarter of 2004. Hip product sales were up 9% to $4.1 million compared with $3.7 million in the second quarter of 2004. Comparable revenues from tissue services were $2.6 million in the quarter compared to $2.7 million.”

Petty said, “U.S. sales grew 12% to $18.4 million from $16.4 million in the comparable quarter in 2004 while international sales were up 36% to $5.5 million from $4 million in the second quarter of 2004. We are encouraged with the advancements we made during the quarter. We have made significant strides in improving our supply chain and we continue to work on shortterm improvements and long-term strategies in this area.”

Chief Financial Officer Jody Phillips said, “Gross margin during the quarter improved from 66.3% last year to 67.4%. This was an excellent result considering the strong growth of our international sales, which carry a lower margin. Total operating expenses in the quarter increased 25% to $13.0 million. R&D expenses increased 23% to 6.5% of sales. We expect both the growth rate and percentage of sales for R&D efforts to increase through the balance of the year as we reach key milestones in support of new product development initiatives. Although these expenses are impacting the growth of our short-term earnings, we believe these near term strategic investments will yield stronger earnings growth for Exactech’s future.”

Looking forward, the company said its target for diluted earnings per share in the third quarter ending September 30, 2005 is in the range of $0.14 to $0.16 based on anticipated revenues of $21 million to $23 million. The company updated its target range for 2005 revenue to $90 million to $94 million with diluted EPS of $0.56 to $0.60. 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.

The financial statements are below.

Based in Gainesville, Fla., Exactech develops and markets orthopaedic implant devices, related surgical instruments and biologic materials and services to hospitals and physicians. The company manufactures many of its orthopaedic devices at its Gainesville facility. Exactech’s orthopaedic products are used in the restoration of bones and joints that have deteriorated as a result of injury or diseases such as arthritis. Exactech markets its products in the United States and in more than 25 countries in Europe, Asia, Australia and Latin America.

The company has scheduled a conference call on Wednesday, July 27 at 11 a.m. Eastern. To participate, call (800) 510-9661, pass code 52406360, any time after 10:55 a.m. Eastern on July 27. International and local callers should dial (617) 614-3452, pass code 52406360. While inconference, if callers should experience any difficulty or require operator assistance, they can press the (*) followed by the (0) button. This will call an operator to the line.

A live and archived webcast will be available on the Internet for 90 days at http://phx.corporateir. net/playerlink.zhtml?c=75925&s=wm&e=1102759. Viewers will need Windows Media Player or Real Player to listen to the broadcast.

An investment profile on Exactech may be found athttp://www.hawkassociates.com/exactech/profile.htm.

Additional information about Exactech, Inc. can be found at http://www.exac.com. An online virtual investor relations kit containing Exactech press releases, SEC filings, current price quotes, stock charts and other useful information for investors can be found on the Hawk Associates website, http://www.hawkassociates.com. Investors may contact Chief Financial Officer Jody Phillips at (352) 377-1140 or Julie Marshall or Frank Hawkins, Hawk Associates Inc., at (305) 451-1888, e-mail: info@hawkassociates.com.

This release contains various forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 which represent the company’s expectations or beliefs concerning future events of the company’s financial performance. 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 the effect of competitive pricing, the company’s dependence on the ability of third-party manufacturers to produce components on a basis which is cost-effective to the company, market acceptance of the company’s products and the effects of government regulation. Results actually achieved may differ materially from expected results included in these statements.

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