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| 8-K - FORM 8-K - Symmetry Medical Inc. | v320203_8k.htm |
PRESS RELEASE
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Contact: Symmetry Medical Inc. Fred L. Hite Senior Vice President Chief Financial Officer (574) 371-2218 |
Investors and Media: The Ruth Group Zack Kubow (646) 536-7020 zkubow@theruthgroup.com
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Symmetry Medical Reports Second Quarter 2012 Financial Results
Reduced Total Debt during the Second Quarter by $27 Million
Second Quarter Highlights:
| · | Revenue of $102.3 million, up 8% year-over-year and 2% sequentially |
| · | Gross margin of 26.2% compared to 23.5% year ago |
| · | Operating income of $8.1 million; as adjusted operating income of $12.1 million, up 16% year-over-year and 21% sequentially |
| · | Net income of $1.6 million; as adjusted net income of $4.9 million, a decline of 19% year-over-year and an increase of 56% sequentially |
| · | Generated strong cash from operations of $17.1 million |
| · | Reiterates 2012 revenue and EPS guidance |
WARSAW, Ind., August 2, 2012 - Symmetry Medical Inc. (NYSE: SMA), a leading global source of innovative medical device solutions, including surgical instruments, orthopedic implants, and sterilization cases and trays, announced second quarter 2012 financial results for the period ended June 30, 2012.
| Second Quarter | Vs Prior Quarter | |||||||||||||||||||||||
| (in millions, except per share data) | 2012 | 2011 | Change | 2Q'12 | 1Q'12 | Change | ||||||||||||||||||
| Revenue | $ | 102.3 | $ | 94.7 | 8 | % | $ | 102.3 | $ | 100.7 | 2 | % | ||||||||||||
| Operating income (loss) | 8.1 | 7.5 | 8 | % | 8.1 | 6.1 | 34 | % | ||||||||||||||||
| Net income (loss) | 1.6 | 4.2 | -61 | % | 1.6 | 0.8 | 96 | % | ||||||||||||||||
| EPS | $ | 0.05 | $ | 0.12 | -58 | % | $ | 0.05 | $ | 0.02 | 150 | % | ||||||||||||
| As Adjusted Non-GAAP* | ||||||||||||||||||||||||
| Operating income* | $ | 12.1 | $ | 10.4 | 16 | % | $ | 12.1 | $ | 10.0 | 21 | % | ||||||||||||
| Net income* | 5.0 | 6.1 | -19 | % | 5.0 | 3.2 | 56 | % | ||||||||||||||||
| EPS* | $ | 0.14 | $ | 0.17 | -18 | % | $ | 0.14 | $ | 0.09 | 56 | % | ||||||||||||
| Revenue by Product: by Segment | ||||||||||||||||||||||||
| OEM Solutions Revenue | ||||||||||||||||||||||||
| Instruments | $ | 28.5 | $ | 31.0 | -8 | % | $ | 28.5 | $ | 27.0 | 6 | % | ||||||||||||
| Implants | 25.1 | 26.5 | -5 | % | 25.1 | 24.8 | 1 | % | ||||||||||||||||
| Cases | 14.5 | 22.8 | -36 | % | 14.5 | 15.9 | -9 | % | ||||||||||||||||
| Other | 6.9 | 5.6 | 23 | % | 6.9 | 6.3 | 10 | % | ||||||||||||||||
| Total OEM Solutions Revenue | $ | 75.0 | $ | 85.9 | -13 | % | $ | 75.0 | $ | 74.0 | 1 | % | ||||||||||||
| Symmetry Surgical Revenue | 27.3 | 8.8 | 210 | % | 27.3 | 26.7 | 2 | % | ||||||||||||||||
| Total Revenue | $ | 102.3 | $ | 94.7 | 8 | % | $ | 102.3 | $ | 100.7 | 2 | % | ||||||||||||
* Excludes non-cash charges for stock compensation expense, amortization of intangible assets and debt issuance costs, as well as charges for management transition costs, acquisition related costs, facility closure and severance costs, SEC related legal costs and legal entity restructuring costs. See “As Adjusted Financial Measures” below.
Revenue for the second quarter 2012 was $102.3 million, up 8.0% compared to $94.7 million in the same period last year and up 1.6% compared to $100.7 million in the first quarter 2012. The year-over-year revenue increase was driven by growth in the Company’s Symmetry Surgical segment, partially offset by a decline in sales in the Company’s OEM Solutions segment. Symmetry Surgical segment results for the second quarter 2012 included the Company’s December 2011 acquisition of the surgical instruments business of Codman & Shurtleff, Inc. and its August 2011 acquisition of Olsen Medical.
The decline in revenue in the Company’s OEM Solutions segment from $85.9 million in the second quarter 2011 to $75.0 million in the second quarter 2012 was primarily driven by continued reduced capital spending on instruments and cases by OEM customers in the face of sluggish procedural growth. Second quarter 2012 OEM Solutions segment revenue was also impacted by $1.5 million, or -1.8%, due to the unfavorable impact of foreign currency exchange rates. On a sequential basis, second quarter 2012 OEM Solutions revenue was up 1.4% compared to the first quarter 2012, driven by increased demand in the Instruments and Other revenue categories, partially offset by softness in case customer demand. Implants revenue was stable compared to the first quarter 2012, in-line with the Company’s expectations and indicative of the stable procedure growth reported during the second quarter 2012.
The increase in revenue from the Company’s Symmetry Surgical segment from $8.8 million in the second quarter 2011 to $27.3 million in the second quarter 2012 was primarily due to the inclusion of $16.7 million of revenues from the Company’s acquisition of the surgical instruments business of Codman & Shurtleff, Inc. and Olsen Medical. Excluding these acquisitions, Symmetry Surgical segment revenue grew 19.6% year-over-year and 2.2% sequentially.
Gross profit for the second quarter 2012 was $26.8 million, up 20.4% compared to $22.2 million in the same period last year. Gross margin percentage for the second quarter 2012 was 26.2%, compared to 23.5% in the second quarter 2011. The increase in gross margin was driven by a larger percentage of revenue from the Company’s higher margin Symmetry Surgical segment, partially offset by increased manufacturing costs to solidify customer service levels and decreased leveraging of overhead costs due to lower sales volume in the OEM Solutions segment. This impact was partially mitigated by improvements in scrap and consumables during the second quarter 2012.
Selling, general and administrative expenses in the second quarter 2012 were $18.4 million, compared to $13.0 million in the same period last year. The increase in selling, general and administrative expenses in the second quarter 2012 was primarily due to the inclusion of $4.1 million of expenses related to the acquisitions of Olsen Medical and the surgical instruments business of Codman & Shurtleff, Inc. Additionally, intangible assets were acquired with both these acquisitions which resulted in an increase of $1.3 million in amortization expense. The second quarter 2012 also included a $1.1 million increase in stock compensation expense compared to the prior year and $0.3 million in legal entity restructuring expenses that did not occur in the second quarter 2011. These increases were partially offset by the reduction of $0.5 million management transition expenses from the same period last year. Facility closure and severance costs were $0.3 million in the second quarter of 2012, compared to $1.7 million in the same period last year.
Operating income for the second quarter 2012 was $8.1 million, up 7.8% compared to $7.5 million in the same period last year. Operating margin was 7.9% for both the second quarter 2012 and the same period last year. Excluding amortization of intangible assets, stock compensation expense, acquisition related costs, legal entity restructuring costs, SEC-related legal costs, management transition costs, and facility closure and severance costs referenced above, operating income for the second quarter 2012 was $12.1 million, up 16.1% compared to $10.4 million in the same period last year.
Income tax expense for the second quarter 2012 was $1.6 million, compared to income tax expense of $1.9 million in the same period last year.
Net income for the second quarter 2012 was $1.6 million, or $0.05 per diluted share, compared to net income of $4.2 million, or $0.12 per diluted share, in the same period last year. Excluding amortization of intangible assets and debt issuance costs, stock compensation expense, acquisition related costs, legal entity restructuring costs, SEC-related legal costs, management transition costs, and facility closure and severance costs referenced above, net income for the second quarter 2012 was $5.0 million, or $0.14 per diluted share, compared to $6.1 million, or $0.17 per diluted share in the same period last year.
The weighted average number of diluted shares outstanding during the second quarter of 2012 was 36,330,792.
Thomas J. Sullivan, President and Chief Executive Officer of Symmetry Medical, stated, “During the second quarter we delivered solid financial results, including further debt reduction, and made progress with our strategic operational initiatives. In our core OEM Solutions segment, we improved our gross margin and operating efficiency while continuing to deliver outstanding quality and customer service. This was complemented by strong performance in our Symmetry Surgical direct to hospital business segment, which continued to launch innovative new products and grow faster than market. We are on track with the Symmetry Surgical integration process and successfully transitioned to a direct distributor relationship in key markets in Asia, specifically Japan, Australia and New Zealand.”
Financial Guidance
The following forward-looking estimates regarding 2012 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.
Based on the second quarter 2012 results, the Company is reiterating its full year 2012 revenue and earnings per share guidance. For the full year 2012, the Company expects revenue to be in the range of $410 million to $425 million. The Company expects full year 2012 GAAP earnings per diluted share to be in the range of $0.30 to $0.40 and full year 2012 as adjusted* earnings per diluted share to be in the range of $0.55 to $0.65. The as adjusted* earnings per diluted share guidance excludes the impact of amortization of intangible assets and debt issuance costs, stock compensation expense, acquisition related costs, legal entity restructuring costs, SEC-related legal costs, management transition costs, and facility closure and severance costs. These items are expected to negatively impact full year 2012 GAAP earnings per diluted share by approximately $0.25.
| Diluted earnings per share – GAAP | $0.30 - $0.40 |
| Estimated Amortization | ($0.17) |
| Estimated stock compensation expense | ($0.06) |
| Estimated all other adjustments | ($0.02) |
| Diluted earnings per share – as adjusted* | $0.55 - $0.65 |
Conference Call
Symmetry Medical will host a conference call to discuss second quarter 2012 financial results at 8:00 a.m. ET on August 2, 2012. A live webcast of the conference call will be available online from the investor relations page of the Company’s corporate website at www.symmetrymedical.com. The dial-in numbers are (800) 259-0251 for domestic callers and (617) 614-3671 for international. The reservation number for both is 68775658. After the live webcast, the call will remain available on Symmetry Medical’s website through November 2, 2012. In addition, a telephonic replay of the call will be available until August 9, 2012. The replay numbers are (888) 286-8010 for domestic callers and (617) 801-6888 for international callers. Please use reservation code 13451089.
About Symmetry Medical Inc.
Symmetry Medical Inc. is a leading global source of innovative medical device solutions, including surgical instruments, orthopedic implants, and sterilization cases and trays. The Company’s thousands of 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.
As Adjusted Non-GAAP Measures
The as adjusted* measures, including adjusted operating income, net income and EPS, shown in this release exclude the impact of amortization of intangible assets and debt issuance costs, stock compensation expense, acquisition related costs, legal entity restructuring costs, SEC-related legal costs, management transition costs, and facility closure and severance 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 | Six Months Ended | |||||||||||||||
| June 30, | July 2, | June 30, | July 2, | |||||||||||||
| 2012 | 2011 | 2012 | 2011 | |||||||||||||
| (In Thousands, Except Per Share Data) | ||||||||||||||||
| (unaudited) | ||||||||||||||||
| Revenue | $ | 102,335 | $ | 94,721 | $ | 203,020 | $ | 190,499 | ||||||||
| Cost of revenue | 75,564 | 72,493 | 151,105 | 148,948 | ||||||||||||
| Gross profit | 26,771 | 22,228 | 51,915 | 41,551 | ||||||||||||
| Selling, general and administrative expenses | 18,358 | 13,014 | 37,067 | 28,630 | ||||||||||||
| Facility closure and severance costs | 299 | 1,689 | 672 | 2,273 | ||||||||||||
| Operating income | 8,114 | 7,525 | 14,176 | 10,648 | ||||||||||||
| Other (income) expense: | ||||||||||||||||
| Interest expense | 5,024 | 907 | 10,168 | 1,790 | ||||||||||||
| Derivatives valuation gain | (63 | ) | - | (63 | ) | - | ||||||||||
| Other | (56 | ) | 551 | (454 | ) | 751 | ||||||||||
| Income before income taxes | 3,209 | 6,067 | 4,525 | 8,107 | ||||||||||||
| Income tax expense | 1,573 | 1,892 | 2,059 | 2,570 | ||||||||||||
| Net income | $ | 1,636 | $ | 4,175 | $ | 2,466 | $ | 5,537 | ||||||||
| Net income per share: | ||||||||||||||||
| Basic | $ | 0.05 | $ | 0.12 | $ | 0.07 | $ | 0.15 | ||||||||
| Diluted | $ | 0.05 | $ | 0.12 | $ | 0.07 | $ | 0.15 | ||||||||
| Weighted average common shares and equivalent shares outstanding: | ||||||||||||||||
| Basic | 35,913 | 35,540 | 35,904 | 35,507 | ||||||||||||
| Diluted | 36,331 | 35,990 | 36,284 | 35,963 | ||||||||||||
Symmetry Medical Inc.
Consolidated Balance Sheets
In Thousands
| June 30, | December 31, | |||||||
| 2012 | 2011 | |||||||
| (unaudited) | ||||||||
| ASSETS: | ||||||||
| Current Assets: | ||||||||
| Cash and cash equivalents | $ | 9,563 | $ | 18,931 | ||||
| Accounts receivable, net | 55,914 | 51,835 | ||||||
| Inventories | 75,957 | 84,678 | ||||||
| Refundable income taxes | 2,656 | 5,090 | ||||||
| Deferred income taxes | 9,604 | 7,535 | ||||||
| Derivative valuation asset | 63 | - | ||||||
| Other current assets | 4,693 | 4,863 | ||||||
| Total current assets | 158,450 | 172,932 | ||||||
| Property and equipment, net | 101,397 | 103,363 | ||||||
| Goodwill | 228,491 | 229,112 | ||||||
| Intangible assets, net of accumulated amortization | 120,288 | 124,276 | ||||||
| Other assets | 8,643 | 9,182 | ||||||
| Total Assets | $ | 617,269 | $ | 638,865 | ||||
| LIABILITIES AND SHAREHOLDERS' EQUITY: | ||||||||
| Current Liabilities: | ||||||||
| Accounts payable | $ | 30,232 | $ | 23,343 | ||||
| Accrued wages and benefits | 10,083 | 7,637 | ||||||
| Other accrued expenses | 8,672 | 5,825 | ||||||
| Accrued income taxes | 137 | 522 | ||||||
| Current portion of derivative valuation liability | 383 | - | ||||||
| Deferred income taxes | - | 39 | ||||||
| Revolving line of credit | 788 | 6,567 | ||||||
| Current portion of capital lease obligations | 507 | 483 | ||||||
| Current portion of long-term debt | 11,111 | 5,904 | ||||||
| Total current liabilities | 61,913 | 50,320 | ||||||
| Accrued income taxes | 6,930 | 6,844 | ||||||
| Deferred income taxes | 18,910 | 18,459 | ||||||
| Derivative valuation liability, less current portion | 3,123 | - | ||||||
| Other liabilities | 630 | 619 | ||||||
| Capital lease obligations, less current portion | 1,648 | 1,907 | ||||||
| Long-term debt, less current portion | 221,381 | 259,317 | ||||||
| Total Liabilities | 314,535 | 337,466 | ||||||
| Shareholders' Equity: | ||||||||
| Common Stock, $.0001 par value; 75,000 shares authorized; shares issued June 30, 2012--36,624; December 31, 2011--36,426 | 4 | 4 | ||||||
| Additional paid-in capital | 284,662 | 283,071 | ||||||
| Retained earnings | 19,606 | 17,140 | ||||||
| Accumulated other comprehensive income (loss) | (1,538 | ) | 1,184 | |||||
| Total Shareholders' Equity | 302,734 | 301,399 | ||||||
| Total Liabilities and Shareholders' Equity | $ | 617,269 | $ | 638,865 | ||||
Reconciliation of As Adjusted Financial Measures
| Three Months Ended | ||||||||||||
| June 30, | March 31 | July 2, | ||||||||||
| 2012 | 2012 | 2011 | ||||||||||
| (In Thousands, Except Per Share Data) | ||||||||||||
| (unaudited) | ||||||||||||
| Operating income, as reported | $ | 8,114 | $ | 6,062 | $ | 7,525 | ||||||
| Adjustments: | ||||||||||||
| Amortization of intangible assets | 2,008 | 2,012 | 722 | |||||||||
| Stock Compensation expense* | 1,003 | 946 | (130 | ) | ||||||||
| Management transition costs | 58 | 58 | 518 | |||||||||
| Acquisition related costs** | 264 | 379 | - | |||||||||
| SEC-related legal costs*** | 12 | 121 | 76 | |||||||||
| Facility closure and severance costs | 299 | 373 | 1,689 | |||||||||
| Legal entity restructuring**** | 315 | - | - | |||||||||
| Operating income, as adjusted | $ | 12,073 | $ | 9,951 | $ | 10,400 | ||||||
| Net income, as reported | $ | 1,636 | $ | 830 | $ | 4,175 | ||||||
| Adjustments: | ||||||||||||
| Amortization of intangible assets | 1,305 | 1,308 | 469 | |||||||||
| Amortization of debt issuance costs | 315 | 227 | 55 | |||||||||
| Stock Compensation expense* | 652 | 615 | (85 | ) | ||||||||
| Management transition costs | 38 | 38 | 337 | |||||||||
| Acquisition related costs** | 172 | 247 | - | |||||||||
| SEC-related legal costs*** | 8 | (334 | ) | 49 | ||||||||
| Facility closure and severance costs | 194 | 242 | 1,098 | |||||||||
| Legal entity restructuring**** | 630 | - | - | |||||||||
| Net income, as adjusted | $ | 4,950 | $ | 3,173 | $ | 6,098 | ||||||
| Earning per diluted share, as reported | $ | 0.05 | $ | 0.02 | $ | 0.12 | ||||||
| Impact of adjustments | 0.09 | 0.07 | 0.05 | |||||||||
| Earning per diluted share, as adjusted | $ | 0.14 | $ | 0.09 | $ | 0.17 | ||||||
* Stock compensation expense is included in two adjustment categories; stock compensation expense and management transition costs. Management transition costs for the three months ended July 2, 2011 included stock compensation expense of $171.
** First and second quarter 2012 include $105 and $173, respectively, of acquisition costs; $274 and $91, respectively, of non-cash purchase accounting inventory step-up amortization.
*** All quarters include professional fees associated with the informal SEC inquiry which concluded in early 2012. First quarter 2012 includes cash received by the Corporation from two executive officers related to the settlement of the informal SEC inquiry, which was reported in Other Income in the statement of operations.
**** Legal entity restructuring includes professional fees, foreign currency impact and a net unfavorable income tax impact.
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