) third-quarter 2013 adjusted earnings per share of 7 cents beat
the Zacks Consensus Estimate by 3 cents. However, earnings were
significantly lower than the year-ago adjusted earnings of 16
cents per share. The decline resulted from soft revenues as well
as various internal issues. Adjusted net earnings significantly
declined 54.7% to $26.2 million.
In the quarter under review, the company reported net loss of
$34.5 million or 95 cents per share compared to a net income of
$3.7 million or 10 cents earned in the year-ago quarter.
Revenues declined 3% year over year to $98.0 million, falling
short of the Zacks Consensus Estimate of $101 million. Weak sales
in both the Original Equipment Manufacturer (OEM) Solutions and
the Symmetry Surgical businesses led to the downfall.
Gross margin in the quarter was 25.0%, down by a whopping 300
basis points (bps) from 28.0% a year ago. The decline was
attributable to lower percentage of revenue contribution from the
high- margin Symmetry Surgical segment. The decline in revenues
in the OEM Solutions franchise further hurt margins.
Selling, marketing, general and administrative (SG&A) charges
increased 6.0% to $17.8 million. Research and Development
(R&D) expenses declined 13.3% to $1.1 million. Operating loss
was $46.5 million, compared to operating income of $10.2 million
in the comparable period last year.
Revenues from the core OEM Solutions segment dropped 5% to $75.8
million, owing to sales decline in Instruments and operational
issue at the company's subsidiary, Clamonta Ltd., which services
the Aerospace industry and is reported in the Other category.
Moreover, fire in the Acid Shop at the U.K. implant manufacturing
facility also dampened OEM sales growth. However, this
underperformance was offset by higher revenues in the Case and
Implant categories. Foreign currency exchange rates benefited
total revenues in the OEM segment by $0.3 million, or 0.4%.
Among the sub-categories, Instruments revenues dipped 8% year
over year to $27.2 million, while the Implants business posted a
2% rise in revenues to $26.1 million. Cases revenues surged 20.0%
in the quarter to $17.0 million on the back of new products.
Other revenues were $5.5 million, down 18.0%, mainly due to sales
reduction in the aerospace category.
Revenues from the smaller Symmetry Surgical unit continues to
fall due to sales disruptions associated with integration of
Codman surgical instruments business into Symmetry Surgical.
Revenues dropped 10.0% to $22.2 million in the quarter.
SMA exited the third quarter of 2013 with cash and cash
equivalents of $4.9 million compared with $9.8 million at the end
of 2012. Long-term debt (including current portion) decreased to
$108.3 million versus $211.2 million at the end of 2012. The
company generated solid operating cash flow of $14.7 million and
used $1.0 million for capital expenditures in the quarter.
SMA's dismal performance in the third quarter, coupled with
difficult macroeconomic conditions in the OEM market and foreign
exchange rates, induced management to lower its 2013 guidance.
The company has reduced expected sales to the band of $398-$402
million from $400-$415 million for the full year. The Zacks
Consensus Estimate for 2013 revenues of $408 million lies above
the guided range.
Moreover, the company expects to incur losses, on a reported
basis, in 2013. The company expects reported loss per share in
the range of 94 cents to 90 cents compared with the earlier
guided range of earnings of 14-24 cents for 2013.
Adjusted earnings are now anticipated in the range of 28 cents to
32 cents, down from the earlier guided range of 40 cents to 50
cents for the year. This includes a negative impact of the
Medical Devices excise tax of 2 cents. The Zacks Consensus
Estimate for 2013 earnings of 25 cents lies below the guided
The adjusted earnings forecast excludes one-time items such as
facility closure/severance, debt issuance costs, asset impairment
charges, acquisition and amortization-related charges, which are
expected to dilute 2013 earnings by roughly $1.22 a share
(earlier 26 cents).
Although adjusted earnings beat the Zacks Consensus Estimate, we
remain concerned about Symmetry's dwindling revenue growth. The
sudden drop in the core OEM business due to
lower-than-anticipated instrument volume, along with internal
issues at the Aerospace category and the unexpected fire in the
U.K. facility, posed serious causes of concern.
Moreover, the high-margin Surgical business continues to face
headwinds from the integration of the Codman business. All these
factors have led management to significantly lower its outlook
for the rest of the year, which is indeed disappointing.
Symmetry presently carries a Zacks Rank #4 (Sell). While we
recommend avoiding this stock until the company's performance
improves, other companies such as
Bio-Rad Laboratories, Inc.
INSYS Therapeutics Inc.
Hill-Rom Holdings, Inc.
) warrant a look. All these stocks carry a Zacks Rank #1 (Strong
BIO-RAD LABS -A (BIO): Free Stock Analysis
HILL-ROM HLDGS (HRC): Free Stock Analysis
SYMMETRY MEDICL (SMA): Free Stock Analysis
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