GAINESVILLE, Fla. -- October 28, 2008 --  Exactech, Inc. (Nasdaq: EXAC), a developer and producer of bone and joint restoration products for hip, knee, shoulder, spine and biologic materials, announced today that revenue for the third quarter of 2008 increased 27% to $37.9 million from $30.0 million in the third quarter of 2007. Diluted earnings per share for the quarter were $0.16 based on net income of $2.1 million. This compares with net income of $2.5 million or $0.21 diluted EPS a year ago. As previously announced, the net income includes pre-tax legal expenses and costs of $1.2 million related to the ongoing Department of Justice inquiry.

Third Quarter Highlights and Segment Performance

• Third quarter revenue increased 27% to $37.9 million
• Revenue growth, excluding acquisitions and distribution terminations, was 21%
• Excluding DOJ inquiry legal expenses, net income increased 15% to $2.9 million
• Knee implant revenue increased 16% to $16.6 million
• Organic hip implant revenue increased 8% to $5.5 million
• Biologic services revenue increased 12% to $4.7 million
• Shoulder implant revenue increased 73% to $4.2 million
• Other revenue of $6.9 million included $1.4 million for spine products and revenue from the acquired French distributor

For the first nine months of 2008, revenue was $121.4 million, an increase of 33% over $91.1 million for the comparable period last year. Net income for the first nine months of 2008 was up 38% at $8.0 million compared to $5.8 million for the first nine months of 2007 including all DOJ related legal expenses year to date. Diluted EPS was $0.63 for the first nine months of 2008 as compared to $0.49 for the first nine months of 2007.

Exactech Chairman and CEO Bill Petty said, “We were pleased with our operating performance as characterized by the 27% growth in revenue during the quarter, but legal expenses and costs related to the ongoing DOJ investigation negatively impacted our net income. We are cooperating fully with the DOJ in its investigation. Overall the organic growth of our business continues to be healthy. We have reason to feel positive about the future because of market acceptance of our growing line of products and because of the strong pipeline of new products.”

Exactech President David Petty said, “U.S. sales grew 7% to $26.3 million from $24.6 million in the comparable quarter in 2007. Excluding the Link U.S. distribution termination, domestic sales increased 15%. Our international business continued the strong performance with third quarter sales increasing 116% to $11.6 million from $5.4 million in the third quarter of 2007. Excluding the impact of our French distributor acquisition, international sales increased 70% during the quarter. International sales for the quarter represented 31% of total sales, compared with 18% in the same quarter last year.”

Chief Financial Officer Jody Phillips said, “Gross margin percentage for the quarter decreased to 63.9% compared to 66.5% for the comparable quarter last year which was consistent with our expectations due to the impact of international business. Total operating expenses in the quarter were $20.3 million, up 29% from $15.7 million in the comparable quarter last year. The significant increase in operating expenses was primarily due to the addition of the distribution costs from acquisitions and higher legal expenses.”

Looking forward, the company said it anticipates revenue for the fourth quarter ending December 31, 2008 to be in the range of $37 million to $40 million and diluted EPS in the range of $0.23 to $0.25 excluding DOJ related expenses. For 2009, the company is releasing its initial targets for revenue in the range of $184 million to $194 million and for diluted EPS of $1.06 to $1.14 excluding DOJ related expenses. 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.

Exactech will hold a conference call on Wednesday, October 29 at 10:00 a.m. Eastern Time. To participate in the call, dial 1-800-762-8779 any time after 9:50 a.m. Eastern on October 29. International and local callers should dial 1-480-248-5081. While in conference, if callers should require operator assistance, they can press the star followed by the zero button. This will call an operator to the line.

A live webcast of the call will be available at viavid.net/dce.aspx?sid=00005750 A podcast will be available approximately one hour after the event ends and can be accessed at viavid.net/mp3/00005750.mp3. Both will be archived for approximately 30 days.

The financial statements follow.

About Exactech

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 Australia, in addition to more than 30 markets in Europe, Asia and Latin America. Additional information about Exactech, Inc. can be found at www.exac.com. Copies of Exactech’s press releases, SEC filings, current price quotes and other valuable information for investors may be found at <>http://www.hawkassociates.com.

An investment profile on Exactech may be found at www.hawkassociates.com/profile/exac.cfm.

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: exactech@hawkassociates.com. To receive future releases in e-mail alerts, sign up at www.hawkassociates.com/about/alert.

PDF