Exactech (EXAC)

Q4 Revenue $26.2M, Net Income $2.3M or $0.19 EPS

Gainesville, Fla., February 26, 2007 — Exactech, Inc. (Nasdaq: EXAC) announced today that revenue for fiscal year 2006 increased 13% to $102.4 million from $91.0 million in 2005. Net income for the year was $7.8 million or $0.67 diluted earnings per share for the year, compared with net income of $6.6 million or $0.57 diluted earnings per share during 2005.

Exactech Chairman and CEO Bill Petty said, “Our results in 2006 exceeded our guidance given earlier in the year. For the first time in our company’s history we surpassed $100 million in annual sales. We continued to improve our internal manufacturing capabilities, further strengthened our supply chain and made significant advancements in the development of new product lines.”

For the fourth fiscal quarter ended December 31, 2006, revenue increased 13% to $26.2 million compared with $23.0 million in the fourth quarter of 2005. Net income for the fourth quarter was $2.3 million or $0.19 per diluted share versus net income of $1.8 million or $0.16 per diluted share a year earlier.

Petty said, “Total knee sales increased 8% to $53.6 million in 2006, while hip sales rose 13% to $17.9 million. During the fourth quarter, knee sales were up 12% to $13.3 million and hip sales were up 22% to $4.9 million. Revenues from our biologics division were up 17% for the year to $13.3 million. International sales for the year rose 20% to $22.3 million from $18.6 million in 2005. International sales represented 21.7% of total sales in 2006, compared with 21.5% of total sales in the prior period. In the fourth quarter, international sales increased 11% to $5.7 million from $5.1 million in the same quarter of 2005.

“We believe 2007 will be another strong year for our business as we build on the momentum of 2006. Our flagship Optetrak^® knee system is enhanced by the roll-out of a unicondylar option, Ligament Balancing System™ and Low Profile Instrumentation™, as well as the expansion of our Rotating Bearing Knee system outside of the U.S. Important, on-going expansions to the Novation hip system support the recent growth we’ve experienced with our hip line. We continue to build strong relationships with shoulder surgeons who have shown great interest in the reverse shoulder system, which is pending FDA clearance. Our 2006 introduction of the InterSpace pre-formed cement shoulder spacer expands this unique product line.

Exactech

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Exactech’s Biologics division is rapidly expanding the Optecure™ brand and is currently launching a line extension that includes cortical cancellous bone chips. Additional formulations are also in development with introduction targeted for later this year. Market introduction of our Accelerate™ platelet concentrating system is in process and proving to be of interest to a wide range of surgeons.”

Chief Financial Officer Jody Phillips said, “We made significant financial improvements during 2006 by reducing our inventories by $2.7 million and our total debt by $6.4 million, both during a time when we expanded our product lines. Our gross margins in 2006 were relatively steady at 64.3% as compared to 64.9% in the prior year. A reclassification of royalty expenses to cost of sales from operating expenses in the amount of 3.0% of sales had an offsetting immaterial impact on both years. As a percent of sales, total operating expenses for the year were 50.7% in 2006 compared to 52.4% in 2005, due to leverage of administration and overhead costs over the larger sales base. General and administrative expenses increased 1% for the year and sales and marketing expenses increased 11%, consistent with the company’s growth in sales. Research and development expenses in 2006 increased 6%, but decreased slightly as a percent of sales compared to 2005.

Looking forward, the company said its target for diluted earnings per share in the first quarter ending March 31, 2007 is in the range of $0.15 to $0.16 based on anticipated revenues of $27 million to $29 million. The company said its forecast for 2007 is for revenue in the range of $112 million to $118 million and diluted EPS of $0.72 to $0.76. 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 follow.

A conference call to discuss fourth quarter and year-end results is scheduled for 5 p.m. Eastern today. To participate, call (800) 819-9193 any time after 4:50 p.m. Eastern Time on Feb. 26. International and local callers should dial (913) 981-4911. 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 webcast of the call will be available at www.vcall.com/IC/CEPage.asp?ID=113505 and http://www.hawkassociates.com/exacmore.aspx. It will be archived until May 27.