Bookkeeping: Beginning Exactech (EXAC) Position

Interesting.. Exactech (EXAC) which we highlighted yesterday is being pummeled on what I considered to be excellent earnings. As it falls over 15% this AM I am going to begin my position with a 850 share stake in the low to mid $25s. As I wrote yesterday [Potential Portfolio Idea - Exactech (EXAC)]

The company reports after the bell tonight so the gambler would buy ahead of earnings hoping for the pop. I'm not the gambler. So we'll watch tonight to see how they do after the bell.

So this worked out very well for us in retrospect... without access to an analyst report I can only assume the slow growth in the shoulder segment (up only 4%) might be causing a fuss. But the overall numbers continue to track well and they are still shooting for $0.94 to $0.98 in EPS for the year.

• Exactech, Inc. (Nasdaq:EXAC - News), a developer and producer of bone and joint restoration products for hip, knee, shoulder, spine and biologic materials, announced today that revenue for the second quarter of 2008 increased 38% to $43.7 million from $31.6 million in the second quarter of 2007. Organic growth, excluding acquisitions and distribution terminations, was 28%
• Diluted earnings per share for the quarter was $0.24 based on net income of $3.0 million. This compares with net income of $1.4 million or $0.12 diluted EPS a year ago. Net income increased 115% to $3.0 million. Exactech’s second quarter 2007 net income included an impairment charge of $1.5 million. Excluding this charge, the second quarter 2008 diluted earnings per share was $0.24 compared to $0.20 in the second quarter of 2007.
• Knee implant revenue increased 21% to $20.5 million
• Hip implant revenue increased 4% to $5.7 million
• Biologic services revenue increased 21% to $4.7 million
• Shoulder implant revenue increased 69% to $3.9 million
• Exactech President David Petty said, “U.S. sales grew 24% to $28.8 million from $23.3 million in the comparable quarter in 2007. Our international business received a boost from the contributions of our European distributor start-ups, with second quarter sales increasing 79% to $14.9 million from $8.3 million in the second quarter of 2007. International sales for the quarter represented 34% of total sales, compared with 26% in the same quarter last year.”
• Chief Financial Officer Jody Phillips said, “Gross margin percentage for the quarter was 62.6% compared to 62.7% for the comparable quarter last year but was ahead of our expectations due to higher manufacturing volumes.

Guidance

• Looking forward, the company said it anticipates 32% to 36% revenue growth for the full year 2008, targeting a range of $164 million to $169 million and diluted earnings per share for the year 2008 in the range of $0.94 to $0.98. For the third quarter ending September 30, 2008, the company targets 23% to 33% revenue growth to the range of $37 million to $40 million and diluted earnings per share in the range of $0.21 to $0.23.

For now, we have started a 850 share position in the much loved "healthcare industry" with a 2.1% stake in Exactech. The stock is down about 20% from recent highs with today's visit to the woodshed. There should be good support in the $24-$25 area from where this stock made its most recent breakout.

Long Exactech in fund and personal account