( SMA) recorded second-quarter 2012 adjusted earnings of 12
cents a share, lower than the Zacks Consensus Estimate by a penny.
Adjusted earnings exclude facility consolidation expenses,
acquisitions, debt issuance and legal costs, impairment and
amortization of intangibles, severance costs and management
Profit in the reported quarter was $1.6 million (or 5 cents a
share), down 61% year over year, partially due to higher interest
expenses (up more than fivefold year over year).
Revenues grew 8% year over year to $102.3 million in the second
quarter, marginally lower than the Zacks Consensus Estimate of $103
million. Growth was led by higher sales across the company's
Symmetry Surgical business, partially dampened by lower sales in
the Original Equipment Manufacturer ("OEM") Solutions division.
Revenues from the core OEM Solutions segment dropped 13% to $75
million due to decline in sales to major orthopedic OEM customers
on account of weak procedure growth and currency fluctuation.
Among the sub-segments, Symmetry witnessed yet another fall
across its implants, instruments and surgical cases businesses in
the reported quarter, which fell 5%, 8% and 36% to $25.1 million,
$28.5 million and $14.5 million, respectively.
Revenues from the smaller Symmetry Surgical unit increased more
than threefold to $27.3 million in the quarter, buoyed by the Olsen
Medical and Codman & Shurtleff, Inc. acquisition, which
contributed roughly $16.7 million to the division's
Gross margin increased to 26.2% from 23.5% a year ago, led by
higher margin in the Surgical business and was partially offset by
lofty production and manufacturing costs associated with the OEM
business. However, this did not have much of an impact as the
company has regularly undertaken cost controlling measures with
respect to labor, consumables and scrap.
Adjusted operating margin was 11.8% versus 11% a year ago.
Selling, general and administrative charges, as a percentage of
sales, were higher at 17.9% compared with 13.7% in the prior-year
quarter due to acquisitions-related expenses.
Symmetry exited the second quarter of 2012 with cash and cash
equivalents of roughly $9.6 million, down 41.7% year over year.
Total long-term debt (including current portion) increased almost
three-fold year over year to $232.5 million.
Guidance and Recommendation
Symmetry has retained itsguidance for 2012. The company
continues to expect sales in a band of $410 million and $425
million for the full year.
The earnings per share (on a reported basis) target has been set
in a range of 30 cents to 40 cents for 2012. Adjusted earnings per
share are expected between 55 cents and 65 cents. The forecast
excludes one-time items such as facility closure/severance,
acquisition, impairment, amortization and legal charges, which are
expected to dilute 2012 earnings by roughly 25 cents a share.
Symmetry is the largest OEM provider of implants and related
surgical instruments and cases to orthopedic devices manufacturers.
Its major customers include Johnson & Johnson's DePuy,
The company has created a distinct competitive niche in the
orthopedic devices market with its "Total Solutions Approach." The
company is investing in revamping its management structure and
enhancing customer collaboration, which should push growth moving
Symmetry, in December 2011, completed its $165 million takeover
of the surgical instruments business of Codman. Besides
diversifying its revenue base, the acquisition enables the company
to broaden its global presence.
However, Symmetry still faces price and procedure volume
pressure on the orthopedic front. Also, the company's high spending
may continue to weigh on its bottom line. Currently, we have a
Neutral recommendation on the stock, which retains a short-term
Zacks #4 Rank (Sell).
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