Symmetry Medical Reports Second Quarter 2011 Financial Results

Aug 04, 2011, 07:00 ET from Symmetry Medical Inc.

WARSAW, Ind., Aug. 4, 2011 /PRNewswire/ --

Second Quarter Highlights:

  • Revenue increased 7% year-over-year
  • Operating income of $7.5 million; non-GAAP operating income of $9.7 million up 20% year-over-year
  • Gross margin improves to 23.5%
  • Net income of $4.2 million; non-GAAP net income of $5.6 million up 19% year-over-year
  • Lowers 2011 financial guidance to reflect industry trends

Symmetry Medical Inc. (NYSE: SMA), a leading global source of innovative medical device solutions, including orthopedic implants, surgical instruments, and sterilization cases and trays, announced second quarter 2011 financial results for the period ended July 2, 2011.

Second Quarter

Vs Prior Quarter

(in millions, except per share data)

2011

2010

Change

2Q'11

1Q'11

Change

Revenue

$ 94.7

$ 88.8

7%

$ 94.7

$ 95.8

-1%

Operating Income

7.5

7.8

-3%

7.5

3.1

141%

Net Income

4.2

4.5

-7%

4.2

1.4

207%

EPS

$ 0.12

$ 0.13

-8%

$ 0.12

$ 0.04

200%

Non-GAAP*

Operating Income*

9.7

8.1

20%

9.7

5.9

66%

Net Income*

5.6

4.7

19%

5.6

3.2

78%

EPS*

$ 0.16

$ 0.13

23%

$ 0.16

$ 0.09

78%

Revenue by Product:

Instruments

$ 37.8

$ 35.4

7%

$ 37.8

$ 39.2

-4%

Implants

26.5

28.5

-7%

26.5

27.2

-3%

Cases

24.8

19.8

25%

24.8

23.2

7%

Other

5.6

5.1

10%

5.6

6.2

-10%

   Total Revenue

$ 94.7

$ 88.8

7%

$ 94.7

$ 95.8

-1%

* Excludes charges for management transition costs in 2011, as well as facility consolidation and severance costs incurred in 2011 and 2010.  See “Non-GAAP Financial Measures” below.

Revenue for the second quarter 2011 was $94.7 million, up 6.6% compared to $88.8 million in the same period last year.  The year-over-year revenue growth was primarily driven by increased customer shipments in the Company's instruments and cases businesses.

Gross profit for the second quarter 2011 was $22.2 million, up 9.2% compared to $20.4 million in the same period last year.  Gross margin percentage for the second quarter 2011 was 23.5% compared to 22.9% in the second quarter 2010 and up from 20.2% in the first quarter 2011.  

Selling, general and administrative expenses in the second quarter 2011 were $13.0 million, compared to $12.3 million in the same period last year. The increase in selling, general and administrative expenses in the second quarter 2011 was primarily due to increased employee compensation and benefits associated with the previously announced hiring of the Company's chief executive officer and management transition related expenditures, as well as increased research and development expenses.  Facility closure and severance costs were $1.7 million in the second quarter of 2011, compared to $0.3 million in the same period last year.

Operating income for the second quarter 2011 was $7.5 million, compared to $7.8 million in the same period last year. Operating margin for the second quarter 2011 was 7.9%, compared to 8.7% in the same period last year. Excluding the management transition costs, facility consolidation expenses and employee severance referenced above, operating income for the second quarter 2011 was $9.7 million, compared to $8.1 million in the same period last year.

The second quarter 2010 included a non-cash gain of $0.5 million for the mark to market of the Company's interest rate derivative.  All existing interest rate derivative instruments were unwound during November 2010 in connection with the Company's debt refinancing activities and therefore there was no such gain in the second quarter 2011.

Income tax expense for the second quarter 2011 was $1.9 million, compared to income tax expense of $2.4 million in the same period last year.  

Net income for the second quarter 2011 was $4.2 million, or $0.12 per diluted share, compared to $4.5 million, or $0.13 per diluted share, in the same period last year. Excluding the management transition costs, facility consolidation expenses and employee severance payments referenced above, net income for the second quarter 2011 was $5.6 million, or $0.16 per diluted share, compared to $0.13 in the same period last year.

The weighted average number of diluted shares outstanding during the second quarter of 2011 was 35,989,891.

Thomas J. Sullivan, President and Chief Executive Officer of Symmetry Medical, stated, "Our second quarter results were in-line with our expectations. We made strides in improving our overall operational performance and our efforts resulted in strong year-over-year and sequential margin improvements. We achieved these results while continuing our focus on ensuring that Symmetry is the leader in providing our customers with best-in-class quality and service. During the quarter we further streamlined and enhanced our management team and continued our journey to a more efficient, centralized organization with a uniform quality, regulatory and IT infrastructure across all of our facilities. As we announced yesterday, the acquisition of Olsen Medical will complement our hospital direct distribution business, SSI, and coupled with internally developed products that SSI will launch in the third quarter, positions the Division for continued growth.  Our research and development team will now focus on developing innovative technology and higher margin proprietary products that will add value for our OEM customers and spur future growth. Looking at the second half of 2011, we experienced decreased orders beginning in late May, driven by lower volume trends in the orthopedic industry and customer spending reductions. We have taken prudent actions to adjust our costs while maintaining our strong infrastructure and Total Solutions capabilities, which will allow us to gain market share and drive improved margins and profitability as the industry growth recovers."

Financial Guidance

The following forward-looking estimates regarding 2011 guidance reflect current market conditions and foreign currency rates. Actual results may differ materially, and the Company refers you to forward-looking statements located at the end of the press release.  

For the full year 2011, based on the Company's actual financial results for the first six months of 2011, the acquisition of Olsen Medical, and current trends in the orthopedic and medical device industries, the Company is lowering its financial guidance.  The Company now expects full year 2011 revenue to be in the range of $354 million to $370 million, compared to the previously guided range of $363 million to $383 million. The Company now expects full year 2011 GAAP earnings per diluted share to be in the range of $0.32 to $0.46 and full year 2011 non-GAAP earnings per diluted share to be in the range of $0.43 to $0.57, compared to the previously guided ranges of $0.50 to $0.58 and $0.57 to $0.65, respectively.  The non-GAAP earnings per diluted share guidance excludes the impact of management transition costs, facility consolidation expenses and employee severance, which are expected to negatively impact full year 2011 GAAP earnings per diluted share by approximately $0.11.

Conference Call

Symmetry Medical will host a conference call to discuss second quarter 2011 financial results at 8:00 a.m. ET on August 4, 2011. A live Web cast of the conference call will be available online from the investor relations page of the Company's corporate Web site at www.symmetrymedical.com. The dial-in numbers are (866) 825-3209 for domestic callers and (617) 213-8061 for international. The reservation number for both is 36436342. After the live Web cast, the call will remain available on Symmetry Medical's Web site through November 4, 2011. In addition, a telephonic replay of the call will be available until August 11, 2011. The replay numbers are (888) 286-8010 for domestic callers and (617) 801-6888 for international callers. Please use reservation code 65124571.

About Symmetry Medical Inc.

Symmetry Medical Inc. is a leading global source of innovative medical device solutions, including orthopedic implants, surgical instruments, and sterilization cases and trays.  The Company's nearly 3,000 Teammates provide design, development and worldwide production capabilities for these products to customers in the orthopedic industry, other medical device markets, and specialized non-healthcare markets.  Symmetry's trusted reputation and brands, broad Intellectual Property portfolio and commitment to innovation enable it to collaborate with hundreds of global medical device manufacturers as well as thousands of hospitals to provide solutions for today's needs and tomorrow's growth.  

Non-GAAP Measures

The non-GAAP measures, including adjusted operating income, net income and EPS, shown in this release exclude facility closure, severance costs, and management transition costs.  Reconciliations of these non-GAAP measures to the most directly comparable GAAP measure are included after the financial information included in this press release.  These measures are not in accordance with, or an alternative for, GAAP and may be different from non-GAAP measures used by other companies.  Management believes these non-GAAP measures improve management's and investors' ability to better compare the company's ongoing financial performance between periods and with other companies.

Forward-Looking Statements

Statements in the press release regarding Symmetry Medical Inc.'s business which are not historical facts may be "forward-looking statements" that involve risks and uncertainties, within the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are predictive in nature and are frequently identified by the use of terms such as "may," "might," "will," "should," "expect," "believe," "anticipate," "plan," "estimate," "intend," and similar words indicating possible future expectations, events or actions. Such predictive statements are not guarantees of future performance, and actual outcomes and results could differ materially from our current expectations. We refer you to the "Risk Factors" and "Forward Looking-Statements" sections in the Company's most recent Annual Report on Form 10-K filed with the Securities and Exchange Commission as well as the Company's other filings with the SEC, which are available on the SEC's Web site at www.sec.gov.

Symmetry Medical Inc. 

Consolidated Statements of Operations 

Three Months Ended

YTD

July 2,

July 3,

July 2,

July 3,

2011

2010

2011

2010

(In Thousands, Except Per Share Data)

(unaudited)

Revenue

$      94,721

$ 88,824

$    190,499

$ 173,318

Cost of Revenue

72,493

68,461

148,948

135,919

Gross Profit

22,228

20,363

41,551

37,399

Selling, general and administrative expenses

13,014

12,272

28,630

24,876

Facility closure and severance costs

1,689

340

2,273

860

Operating Income

7,525

7,751

10,648

11,663

Other (income)/expense:

Interest expense

907

1,498

1,790

3,061

Derivatives valuation gain

-

(480)

-

(788)

Other

551

(100)

751

81

Income before income taxes

6,067

6,833

8,107

9,309

Income tax expense

1,892

2,354

2,570

3,199

Net income

$        4,175

$   4,479

$        5,537

$     6,110

Net income per share:

Basic

$          0.12

$     0.13

$          0.15

$       0.17

Diluted

$          0.12

$     0.13

$          0.15

$       0.17

Weighted average common shares and equivalent shares outstanding:

Basic

35,540

35,448

35,507

35,445

Diluted

35,990

35,807

35,963

35,768

Symmetry Medical Inc. 

Consolidated Balance Sheets

In Thousands

July 2,

January 1,

2011

2011

ASSETS:

(unaudited)

Current Assets:

Cash and cash equivalents

$      16,393

$    15,067

Accounts receivable, net

54,384

50,457

Inventories

77,953

70,373

Refundable income taxes

3,222

1,911

Deferred income taxes

4,925

4,597

Other current assets

4,584

3,281

Total current assets

161,461

145,686

Property and equipment, net

106,971

107,879

Goodwill

155,595

154,218

Intangible assets, net of accumulated amortization

38,323

39,601

Other assets

3,631

2,570

Total Assets

$    465,981

$  449,954

LIABILITIES AND SHAREHOLDERS' EQUITY:

Current Liabilities:

Accounts payable

$      23,804

$    23,097

Accrued wages and benefits

9,730

6,808

Other accrued expenses

6,048

3,881

Accrued income taxes

682

233

Deferred income taxes

28

-

Revolving line of credit

6,251

3,692

Current portion of capital lease obligations

482

454

Current portion of long-term debt

1,081

1,397

Total current liabilities

48,106

39,562

Accrued income taxes

6,664

6,564

Deferred income taxes

17,481

17,692

Capital lease obligations, less current portion

2,179

2,418

Long-term debt, less current portion

82,834

87,349

Total Liabilities

157,264

153,585

Shareholders' Equity:

Common Stock, $.0001 par value; 75,000 shares authorized; shares issued July 2, 2011--36,286; January 1, 2011--35,950

4

4

Additional paid-in capital

281,327

279,592

Retained earnings

19,785

14,248

Accumulated other comprehensive income

7,601

2,525

Total Shareholders' Equity

308,717

296,369

Total Liabilities and Shareholders' Equity

$    465,981

$  449,954

Reconciliation of Non-GAAP Financial Measures 

Three Months Ended

July 2,

April 2,

July 3,

2011

2011

2010

(In Thousands, Except Per Share Data)

(unaudited)

Operating Income, as reported

$ 7,525

$ 3,123

$ 7,751

Special charges of management transition costs

518

2,169

-

Facility closure and severance costs

1,689

584

340

Operating Income excluding special charges of management transition costs and facility closure and severance costs

$ 9,732

$ 5,876

$ 8,091

Net Income, as reported

$ 4,175

$ 1,362

$ 4,479

Special charges of management transition costs

337

1,409

-

Facility closure and severance costs

1,098

380

221

Net Income excluding special charges of management transition costs and facility closure and severance costs

$ 5,610

$ 3,151

$ 4,700

Earning per diluted share

$   0.12

$   0.04

$   0.13

Impact of special charges of management transition costs and facility closure and severance costs per diluted share

0.04

0.05

-

Earning per diluted share, excluding special charges of management transition costs and facility closure and severance costs

$   0.16

$   0.09

$   0.13

Contact:

Investors and Media:

Symmetry Medical Inc.                                            

The Ruth Group

Fred L. Hite

Zack Kubow

Senior Vice President

(646) 536-7020

Chief Financial Officer

zkubow@theruthgroup.com

(574) 371-2218

SOURCE Symmetry Medical Inc.



RELATED LINKS

http://www.symmetrymedical.com