Exactech Q3 Revenue Up 10% to $21.5M; Net Income $1.7M or $0.15 EPS

Gainesville, FL, October 26, 2005 -- Exactech, Inc. (Nasdaq: EXAC) announced today that revenue for the third quarter of 2005 increased 10% to $21.5 million from $19.5 million in the third quarter of 2004. Diluted earnings per share for the quarter were $0.15 on net income of $1.73 million compared to diluted earnings per share of $0.14 on net income of $1.68 million.

Exactech Chairman and CEO Bill Petty said, “Sales of our Equinoxe shoulder, Cemex cement product lines, revenue from biologics services and overall international sales helped produce a 10% revenue gain for the quarter. Biologic service revenues were up 13% to $2.9 million in the quarter compared to $2.6 million in the third quarter of 2004 thanks to our marketing efforts and contributions from our newly released OptecureTM product. International sales were up 19% to $4.0 million from $3.3 million in the third quarter of 2004, while U.S. sales grew 8% to $17.5 million from $16.1 million in the comparable quarter in 2004.”

“Sales of our knee products were down 1% to $11.0 million from $11.1 million, and hip product sales decreased 2% to $3.7 million compared with $3.8 million in the third quarter of 2004. These numbers don’t yet fully reflect progress we are making to recover and grow business following supply chain issues experienced primarily during the first two quarters. We hope we will begin to see greater benefits from these improvements in the coming quarters,” Petty said.

For the first nine months of 2005, revenue was $68.0 million, an increase of 12% over revenue of $60.9 million in the first nine months of 2004. Net income for the first nine months was $4.8 million or $0.42 per diluted share, down 13% from $5.4 million or $0.47 per diluted share in the first nine months of 2004. Year to date net income was down primarily as a result of the first quarter.

“The operating results for the quarter reflected product launch costs associated with our new Connexion™ GXL enhanced polyethylene acetabular liners for our AcuMatch® A-Series hip system, which has received 510(k) clearance from the U.S. Food and Drug Administration. Connexion complements the press fit femoral stems successfully launched earlier this year as the first element of our Novation™ Comprehensive Hip System. The combination of enhanced polyethylene and press fit stems addresses more than 50% of the total hip market. We expect this will contribute to growth of our hip products in the years ahead,” Petty said.

Chief Financial Officer Jody Phillips said, “Our gross margin during the quarter improved from 67.9% last year to 69.9%. Total operating expenses in the quarter increased 17% to $12.1 million. Research and development expenses increased 21% to $1.4 million representing 6.5% of sales. As we stated earlier in the year, operating expense growth is anticipated to be higher than sales growth for the balance of this year mainly due to growth in research and development expenses.”

Looking forward, the company said its target for diluted earnings per share in the fourth quarter ending December 31, 2005 is in the range of $0.15 to $0.17 based on anticipated revenues of $21.5 million to $23.5 million. The company updated its target range for 2005 revenue to $90 million to $92 million with diluted EPS of $0.56 to $0.58. The company said its initial forecast for 2006 is for revenue in the range of $100 million to $110 million and diluted EPS of $0.58 to $0.66, which includes a projected impact of $0.08 due to stock options expensing. 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 attached.

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 Thursday, Oct. 27, 2005 at 10 a.m. Eastern. To participate, call (866) 411-4708 any time after 9:55 a.m. Eastern on Oct. 27. While in conference, 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://www.hawkassociates.com/exactech/company.htm. Viewers will need Windows Media Player or Real Player to listen to the broadcast.

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

Additional information about Exactech, Inc. can be found at http://www.exac.com. An online virtual investor 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, email: 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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