) fourth-quarter 2012 adjusted earnings of 15 cents a share
missed the Zacks Consensus Estimate of 19 cents. Adjusted
earnings exclude one-time items other than stock-based
compensation. The year-ago earnings was 3 cents a share.
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In the quarter under review, the company reported profit of $2.9
million (or 8 cents a share) versus a net loss of $3.2 million
(or loss of 9 cents a share) in the year-ago quarter.
For the full year, adjusted earnings of 50 cents a share also
trailed the Zacks Consensus Estimate of 59 cents. However,
reported profit surged more than three fold to $9.1 million (or
25 cents per share) in 2012.
Revenues jumped 26% year over year to $106.6 million in the
fourth quarter, led by strong sales in the Original Equipment
Manufacturer ("OEM") Solutions and Symmetry Surgical businesses.
However, reported revenues were lower than the Zacks Consensus
Estimate of $109 million.
For the full year, sales increased 14% year over year at $410.5
million, but were below the Zacks Consensus Estimate of $413
Revenues from the core OEM Solutions segment grew 7% to $78.1
million, on the back of higher implant sales and lesser impact of
the prior year's unfavorable inventory reductions. Foreign
currency exchange rates did not have any impact on the quarterly
results. On a sequential basis, revenues increased 2.6%,
reflecting increased demand for implants offerings as a result of
improved procedural growth.
Among the sub-segments, Instruments sales climbed 10% year over
year to $30.0 million due to healthy capital spending. The
Implants business also posted a growth of 16% to $26.5 million.
Symmetry witnessed yet another fall across its surgical cases
businesses in the reported quarter, which fell 12% to $13.9
million, indicating weak demand and a loss of market share.
Revenues from the smaller Symmetry Surgical unit jumped 154% to
$28.5 million in the quarter, buoyed by the Codman &
Shurtleff, Inc. acquisition, which contributed roughly $13.1
million to the division's sales. Revenues also include a one-time
purchase of an OEM Solutions client worth $2.9 million. Excluding
the acquisition and the one-time purchase, sales increased 10.4%
year over year in the quarter.
Gross margin increased to 27.1% from 16.4% a year ago, led by
higher margin in the Surgical business as well as margin
improvement in the OEM Solutions franchise. Increased margin in
the OEM Solutions business was driven by the company's cost
controlling measures with respect to labor, consumables and
Selling, marketing, general and administrative charges, as a
percentage of sales, were 17.8% compared with 18.0% in the
prior-year quarter. Adjusted operating margin was 11.9% versus
2.7% a year ago, mainly due to acquisitions and higher gross
margin in the OEM Solutions division.
Symmetry exited the fourth quarter of 2012 with cash and cash
equivalents of roughly $9.8 million, down 48.1% year over year.
Total long-term debt (including current portion) decreased 20.3%
to $211.2 million. The company generated strong operating cash
flow of $10.7 million.
Symmetry divulged its guidance for 2013, taking into account the
present market situation and currency fluctuations. The company
expects sales in a band of $420 million and $440 million for the
The earnings per share (on a reported basis) target has been set
in a range of 35 cents to 47 cents for 2013. Adjusted earnings
are expected to be in the range of 64 cents to 76 cents. This
includes a negative impact of the Medical Devices excise tax of 3
cents. The adjusted earnings forecast excludes one-time items
such as facility closure/severance, acquisition and
amortization-related charges, which are expected to dilute 2013
earnings by roughly 29 cents a share.
The Zacks Consensus Estimate for revenues and adjusted earnings
are $440 million and 80 cents, respectively.
We were disappointed with the fourth quarter results, which
missed estimates by a large margin. Symmetry's high spending and
declining case sale may continue to weigh on its bottom line.
Additionally, fluctuations in foreign exchange rates remain a
cause of concern.
However, we are impressed by the successful integration of the
acquired Codman surgical instruments business with the Symmetry
Surgical unit. Symmetry is the largest OEM provider of implants,
and related surgical instruments and cases to orthopedic devices
manufacturers. The company should take advantage of the improving
orthopedic market trends to get back on track.
Symmetry carries a Zacks Rank #3 (Hold). While we remain on
the sidelines regarding Symmetry, companies such as
), each carrying a Zacks Rank #1 (Strong Buy) warrant a look.