Symmetry Medical Inc.
) posted adjusted earnings per share of 8 cents for the fourth
quarter of 2013 that were in line with the Zacks Consensus
Estimate and marginally higher compared with 7 cents in the same
quarter of 2012. However, adjusted net earnings rose 16.6% to
$3.1 million from $2.6 million in the fourth quarter of 2012.
In the quarter under review, the company reported net loss of
$2.2 million or 6 cents per share compared to net earnings of
$2.9 million or 8 cents in the year-ago quarter. The loss was
attributable to weak revenues in the quarter. Following the
earnings release, shares of the company fell 0.6% after the
market closed yesterday.
For full year 2013, SMA reported a 42.0% fall in adjusted
earnings per share to 29 cents from 50 cents in 2012 and a 41.4%
decline in adjusted net earnings to $10.6 million from $18.1
million in 2012. Earnings per share for the year exceeded the
Zacks Consensus Estimate by a penny.
Revenues declined 5.0% year over year to $101.2 million, falling
short of the Zacks Consensus Estimate of $102.0 million. Lower
revenues from the company's Symmetry Surgical segment, led to the
downfall, partially offset higher revenues from the Original
Equipment Manufacturer (OEM) Solutions segment.
Revenues in the year went down 2.6% to $400.0 million, slightly
lower than the Zacks Consensus Estimate of $401 million. Similar
to fourth quarter 2013, the decrease was attributable to lower
revenues from the Symmetry Surgical segment.
Gross profit for the quarter dipped 10.7% to $25.8 million from
$28.9 million in the same period last year. Gross margin fell 160
basis points (bps) to 25.5%, compared to 27.1% in the fourth
quarter of 2012.
The decrease in gross margin was driven by a lower share of
revenues from the company's higher margin Symmetry Surgical
segment compared to 2012-fourth quarter, and gross margin
pressure in the OEM Solutions segment due to operational issues
at the Clamonta Ltd. subsidiary (which serves the Aerospace
industry and is reported in the Other category) and lower volume
in the Instruments segment.
Gross profit decreased 6.4% to $102.1 million while gross margin
fell 110 bps to 25.5% for the year. The decline was driven by
lower percentage of revenues from the SMA's higher margin
Symmetry Surgical segment compared with 2012.
Adjusted operating profit ebbed 20.4% to $10.1 million from $12.7
million in the 2012-fourth quarter. Adjusted operating margin
slid 190 bps to 10.0% from 11.9% in the 2012-quarter. Adjusted
operating profit for the year dipped 24.9% to $34.3 million while
operating margin decreased 250 bps to 8.6%.
Revenues from the core
segment inched up 0.7% to $78.6 million, owing to higher revenues
from the Case business ($16.9 million), partially offset by lower
revenues from the Instruments business ($28.8 million) and
continued operational issues at the SMA's Clamonta subsidiary.
SMA reported flat revenues in the Implant product business ($26.5
million) despite the previously announced fire in the Acid Shop
at its Sheffield, U.K. implant manufacturing facility, in Sep
2013 and impacted throughput in the fourth quarter.
For full year 2013, revenues from the segment grew 2.5% to $310.8
million. The increase was attributable to stronger demand for
Case and Implant products, partially offset by lower Instruments
segment volume and operational issues at the Clamonta subsidiary.
Revenues from the smaller
segment dropped 20.8% to $22.6 million in the quarter due to the
inclusion of one-time purchase of $2.9 million by an OEM
solutions customer served by Symmetry Surgical in the 2012-fourth
quarter, and sluggish growth on the back of ongoing transition to
distributorships outside the U.S.
Revenue from the segment in the year fell 16.8% to $89.2 million,
due to transition related sales disruptions for the integration
of the Codman surgical instruments business into Symmetry
Surgical, and one-time purchase mentioned above.
SMA exited 2013 with cash and cash equivalents of $7.4 million
compared with $9.8 million at the end of 2012. Long-term debt
decreased 18.6% to $172.0 million as of Dec 28, 2013 versus
$211.2 million as of Dec 29, 2012. Long-term debt to
capitalization ratio fell 250 bps to 37.7% from 40.2% as of Dec
29, 2012. SMA generated operating cash flow of $1.8 million and
incurred $2.2 million as capital expenditures in the quarter.
For 2014, SMA expects revenues in the band of $408-$418 million.
The Zacks Consensus Estimate for 2014 revenues of $416 million
lies within the guided band.
SMA also expects adjusted earnings per share between 42 and 48
cents for the year, including stock based compensation expense.
The Zacks Consensus Estimate of 47 cents per share also lies
within the guided range.
We remain concerned about SMA'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. However, the
company's earnings and revenue projections for 2014 were higher
than 2013, which brings some confidence on the stock.
SMA presently carries a Zacks Rank #3 (Hold). Some better-ranked
stocks in the medical products industry include
Baxter International Inc.
). Both Enzymotec and NuVasive carry a Zacks Rank #1 (Strong
Buy), while Baxter International carries a Zacks Rank #2 (Buy).
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NUVASIVE INC (NUVA): Free Stock Analysis
SYMMETRY MEDICL (SMA): Free Stock Analysis
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