First Quarter Highlights:
- Revenue of $101.3 million, up 2.4% year-over-year
- Net income of $1.3 million; as adjusted net income of $3.3 million
- Earnings per share of $0.03; as adjusted earnings per share of $0.09
WARSAW, Ind., May 1, 2014 (GLOBE NEWSWIRE) -- 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 first quarter 2014 financial results for the period ended March 29, 2014.
| First Quarter | Vs Prior Quarter | |||||
| (in millions, except per share data) | 2014 | 2013 | Change | 1Q'14 | 4Q'13 | Change |
| Revenue | $ 101.3 | $ 98.9 | 2% | $ 101.3 | $ 101.2 | 0% |
| Operating income | 4.8 | 3.9 | 23% | 4.8 | 7.5 | -36% |
| Net income (loss) | 1.3 | (0.3) | Fav | 1.3 | (2.2) | Fav |
| EPS | $ 0.03 | $ (0.01) | Fav | $ 0.03 | $ (0.06) | Fav |
| As Adjusted Non-GAAP* | ||||||
| Operating income* | $ 7.5 | $ 7.4 | 1% | $ 7.5 | $ 10.9 | -31% |
| Net income* | 3.3 | 2.3 | 43% | 3.3 | 3.6 | -8% |
| EPS* | $ 0.09 | $ 0.06 | 50% | $ 0.09 | $ 0.10 | -10% |
| * Excludes charges for stock compensation expense, amortization of intangible assets and debt issuance costs, asset impairment charges, loss on debt extinguishment and unrealized foreign currency impact on an intercompany loan, acquisition related costs, facility closure and severance, product recall costs and net gain on insurance proceeds received. See "As Adjusted Financial Measures" below. | ||||||
| (in millions) | First Quarter | Vs Prior Quarter | ||||
| Revenue by Product: by Segment | 2014 | 2013 | Change | 1Q'14 | 4Q'13 | Change |
| OEM Solutions Revenue | ||||||
| Instruments | $ 28.9 | $ 28.2 | 2% | $ 28.9 | $ 28.8 | 0% |
| Implants | 28.4 | 26.0 | 9% | 28.4 | 26.5 | 7% |
| Cases | 15.7 | 16.4 | -4% | 15.7 | 16.9 | -7% |
| Other | 7.6 | 6.1 | 25% | 7.6 | 6.4 | 19% |
| Total OEM Solutions Revenue | $ 80.6 | $ 76.7 | 5% | $ 80.6 | $ 78.6 | 3% |
| Symmetry Surgical Revenue | 20.7 | 22.2 | -7% | 20.7 | 22.6 | -8% |
| Total Revenue | $ 101.3 | $ 98.9 | 2% | $ 101.3 | $ 101.2 | 0% |
Revenue for the first quarter 2014 was $101.3 million, up 2.4% compared to $98.9 million in the same period last year. The current quarter revenue was primarily driven by higher sales in the Company's OEM Solutions segment, partially offset by a decrease in the Symmetry Surgical segment.
OEM Solutions segment revenue was $80.6 million in the first quarter 2014, a 5.2% increase from $76.7 million in the first quarter 2013. The increase was driven by higher revenue in the Implants, Instruments and Other segments, partially offset by lower revenue in the Cases segment. First quarter 2014 OEM Solutions segment revenue included a benefit of $1.1 million, or 1.4%, due to the favorable impact of foreign currency exchange rates. On a sequential basis, first quarter 2014 OEM Solutions revenue was up 2.5% compared to the fourth quarter 2013, reflecting higher sales in the Implant and Other segments, flat results in the Instruments segment, and lower revenue in the Cases segment. Overall the OEM Solutions segment continues to experience a steady environment, with some quarterly fluctuations based on the timing of customer shipments and inventory management.
Symmetry Surgical segment revenue was $20.7 million in the first quarter 2014, a 7.0% decrease from $22.2 million in the first quarter 2013. First quarter 2014 Symmetry Surgical segment revenue included a benefit of $0.1 million, or 0.3%, due to the favorable impact of foreign currency exchange rates. On a sequential basis, first quarter 2014 Symmetry Surgical segment revenue decreased 8.4% compared to the fourth quarter 2013. For the first quarter 2014, Symmetry Surgical encountered a continued sluggish hospital spending environment which was further complicated by the severe weather impacts.
Gross profit for the first quarter 2014 was $23.9 million, compared to $25.1 million in the same period last year. Gross margin percentage for the first quarter 2014 was 23.6%, compared to 25.4% in the first quarter 2013. Gross margin was driven by a lower percentage of revenue from the Company's higher margin Symmetry Surgical segment as compared to the same period last year. In addition, gross margin in the OEM Solutions segment was impacted by inefficiencies associated with severe weather as well as labor and healthcare inflation.
Sales, marketing, general and administrative expenses in the first quarter 2014 were $17.7 million, compared to $20.0 million in the same period last year. The decrease in the first quarter 2014 was primarily due to reductions of $0.9 million lower sales and marketing expenses along with cost controls at Symmetry Surgical, $0.7 million in self-insured medical claims, $0.6 million in acquisition related costs and $0.1 million in stock based compensation expense. This was partially offset by a $0.1 million increase in amortization expense.
Operating income for the first quarter 2014 was $4.8 million, an increase of 23.9% compared to $3.9 million in the first quarter 2013. Operating margin was 4.8% in the first quarter 2014, compared to 3.9% in the same period last year. Excluding charges for stock compensation expense, amortization of intangible assets, and acquisition related costs, as well as charges for acquisition related costs, facility closure and severance costs, and net gain on insurance proceeds received (referred to collectively as "operating income adjustments"), operating income for the first quarter 2014 was $7.5 million, compared to $7.4 million in the same period last year. The increase was primarily driven by lower operating expenses, partially offset by lower revenue in the Symmetry Surgical segment.
Interest expense for the first quarter 2014 was $2.2 million, compared to interest expense of $4.6 million in the same period last year. This decrease was driven by the Company's focus on using free cash flow to reduce debt and the amendment of the Company's credit facility at the end of 2013, which allowed the Company to eliminate its higher rate mezzanine debt.
Income tax expense for the first quarter 2014 was $0.8 million, compared to an income tax benefit of $0.3 million in the same period last year, driven by the positive pre-tax income in the first quarter 2014 as compared to a pre-tax loss in the same period last year.
Net income for the first quarter 2014 was $1.3 million, or $0.03 per diluted share, compared to net loss of $0.3 million, or $(0.01) loss per diluted share, in the same period last year. Excluding the operating income adjustments noted above, as well as unrealized foreign currency impact on an intercompany loan, legal entity restructuring, amortization of debt issuance costs and loss on debt extinguishment, net income for the first quarter 2014 was $3.3 million, or $0.09 per diluted share, compared to $2.3 million, or $0.06 per diluted share in the same period last year.
The weighted average number of diluted shares outstanding during the first quarter of 2014 was 37,010,895.
Thomas J. Sullivan, President and Chief Executive Officer of Symmetry Medical, stated, "We are pleased with our first quarter results, highlighted by our OEM Solutions business. Looking forward, we expect continued revenue growth and improved gross margin in this segment, driven by operational execution and our efficiency initiatives. We continue our efforts to stabilize the Symmetry Surgical segment, including the March launch of two innovative new products, the Bookwalter® Femoral Elevator and the Symmetry® Sharp Kerrison. We received positive feedback on these products at recent medical meetings and we expect them to strengthen our reputation as a surgical instrument innovator. Overall, we are reiterating our full year financial guidance."
Financial Guidance
The following forward-looking estimates regarding 2014 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 first quarter 2014 results and the current outlook for the remainder of the year, the Company is reiterating its financial guidance for the full year 2014. For the full year 2014, the Company expects revenue to be in the range of $408 million to $418 million. The company is estimating a 3% to 4% procedural growth rate in its key orthopaedic market as well as a 2% to 3% market growth in its worldwide direct to hospital market. The Company expects full year 2014 GAAP earnings per diluted share to be in the range of $0.26 to $0.32 and full year 2014 as adjusted* earnings per diluted share to be in the range of $0.48 to $0.54. As in 2013, this forecast includes a negative $0.02 impact of the Medical Device Excise Tax in SG&A expense. 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, severance costs and other one-time expenses. These items are expected to negatively impact full year 2014 GAAP earnings per diluted share by approximately $0.22.
| Diluted earnings per share – GAAP | $0.26 - $0.32 |
| Estimated Amortization | ($0.14) |
| Estimated stock compensation expense | ($0.06) |
| Estimated all other adjustments | ($0.02) |
| Diluted earnings per share – as adjusted* | $0.48 - $0.54 |
Conference Call
Symmetry Medical will host a conference call to discuss first quarter 2014 financial results at 8:00 a.m. ET on May 1, 2014. 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 (877) 261-8990 for domestic callers and (847) 619-6441 for international. The reservation number for both is 37157181 (please reference "Zack Kubow" as host and "Symmetry Medical" as the Company).After the live webcast, the call will remain available on Symmetry Medical's website through August 1, 2014. In addition, a telephonic replay of the call will be available until May 31, 2014. The replay numbers are (888) 843-7419 for domestic callers and (630) 652-3042 for international callers. Please use reservation code 37157181#.
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, asset impairment charges, the net gain on insurance proceeds received, unrealized foreign currency impact on an intercompany loan, stock compensation expense, acquisition related costs, facility closure and severance costs, product recall costs and loss on debt extinguishment.
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/A 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 | ||
| In Thousands, Except Per Share Data | ||
| Three Months Ended | ||
| March 29, | March 30, | |
| 2014 | 2013 | |
| (unaudited) | (unaudited) | |
| Revenue | $ 101,267 | $ 98,864 |
| Cost of revenue | 77,328 | 73,720 |
| Gross profit | 23,939 | 25,144 |
| Research and development expenses | 1,122 | 1,164 |
| Sales and marketing expenses | 6,686 | 7,120 |
| General and administrative expenses | 10,967 | 12,838 |
| Facility closure and severance | 339 | 129 |
| Operating income | 4,825 | 3,893 |
| Other (income) expense: | ||
| Interest expense | 2,223 | 4,617 |
| Loss on debt extinguishment | 503 | -- |
| Derivatives valuation (gain) loss | -- | 193 |
| Other | 56 | (314) |
| Income (loss) before income taxes | 2,043 | (603) |
| Income tax expense (benefit) | 789 | (309) |
| Net income (loss) | $ 1,254 | $ (294) |
| Net income (loss) per share: | ||
| Basic | $ 0.03 | $ (0.01) |
| Diluted | $ 0.03 | $ (0.01) |
| Weighted average common shares and equivalent shares outstanding: | ||
| Basic | 36,569 | 36,275 |
| Diluted | 37,011 | 36,275 |
| Symmetry Medical Inc. | ||
| Consolidated Balance Sheets | ||
| In Thousands | ||
| March 29, | December 28, | |
| 2014 | 2013 | |
| ASSETS: | (unaudited) | |
| Current Assets: | ||
| Cash and cash equivalents | $ 14,904 | $ 7,362 |
| Accounts receivable, net | 57,031 | 51,813 |
| Inventories | 59,553 | 58,879 |
| Refundable income taxes | 4,725 | 5,784 |
| Deferred income taxes | 5,653 | 5,439 |
| Other current assets | 5,764 | 4,900 |
| Total current assets | 147,630 | 134,177 |
| Property and equipment, net | 90,688 | 89,993 |
| Goodwill | 182,179 | 182,178 |
| Intangible assets, net of accumulated amortization | 103,115 | 105,004 |
| Other assets | 3,674 | 4,484 |
| Total Assets | $ 527,286 | $ 515,836 |
| LIABILITIES AND SHAREHOLDERS' EQUITY: | ||
| Current Liabilities: | ||
| Accounts payable | $ 32,180 | $ 28,837 |
| Accrued wages and benefits | 11,510 | 9,656 |
| Other accrued expenses | 5,661 | 7,138 |
| Accrued income taxes | 184 | 53 |
| Derivative valuation liability | 309 | 283 |
| Revolving line of credit | 213 | -- |
| Current portion of capital lease obligations | 488 | 465 |
| Current portion of long-term debt | -- | 6,531 |
| Total current liabilities | 50,545 | 52,963 |
| Accrued income taxes | 1,380 | 2,126 |
| Deferred income taxes | 8,166 | 7,536 |
| Derivative valuation liability | 1,770 | 1,104 |
| Other liabilities | 918 | 886 |
| Capital lease obligations, less current portion | 838 | 974 |
| Long-term debt, less current portion | 177,000 | 165,450 |
| Total Liabilities | 240,617 | 231,039 |
| Commitments and contingencies | ||
| Shareholders' Equity: | ||
| Common Stock, $.0001 par value; 75,000 shares authorized; shares issued March 29, 2014-- 37,493; December 28, 2013--37,209 | 4 | 4 |
| Additional paid-in capital | 290,092 | 289,257 |
| Retained deficit | (8,277) | (9,531) |
| Accumulated other comprehensive income | 4,850 | 5,067 |
| Total Shareholders' Equity | 286,669 | 284,797 |
| Total Liabilities and Shareholders' Equity | $ 527,286 | $ 515,836 |
| Reconciliation of As Adjusted Financial Measures | |||
| Three Months Ended | |||
| March 29, | December 28, | March 30, | |
| 2014 | 2013 | 2013 | |
| (In Thousands, Except Per Share Data) | |||
| (unaudited) | |||
| Operating income, as reported | $ 4,825 | $ 7,538 | $ 3,893 |
| Adjustments: | |||
| Amortization of intangible assets | 1,899 | 1,896 | 1,776 |
| Stock compensation expense | 834 | 788 | 962 |
| Net gain on insurance proceeds received (1) | (402) | -- | -- |
| Acquisition related costs | -- | (89) | 591 |
| Asset impairment | -- | 296 | -- |
| Facility closure and severance | 339 | 151 | 129 |
| Product recall costs | -- | 324 | -- |
| Operating income, as adjusted | $ 7,495 | $ 10,904 | $ 7,351 |
| Net income (loss), as reported | $ 1,254 | $ (2,157) | $ (294) |
| Adjustments: | |||
| Amortization of intangible assets | 1,234 | 1,232 | 1,154 |
| Amortization of debt issuance costs | 188 | 283 | 303 |
| Loss on debt extinguishment | 327 | 2,899 | -- |
| Stock compensation expense | 542 | 512 | 625 |
| Net gain on insurance proceeds received (1) | (402) | -- | -- |
| Acquisition related costs | -- | (58) | 384 |
| Asset impairment | -- | 181 | -- |
| Unrealized foreign currency impact on intercompany loan | (74) | 369 | -- |
| Product recall costs | -- | 211 | -- |
| Facility closure and severance | 220 | 98 | 84 |
| Net income, as adjusted | $ 3,289 | $ 3,570 | $ 2,256 |
| Earning per diluted share, as reported | $ 0.03 | $ (0.06) | $ (0.01) |
| Impact of adjustments | 0.06 | 0.16 | 0.07 |
| Earning per diluted share, as adjusted | $ 0.09 | $ 0.10 | $ 0.06 |
| (1) Represents insurance proceeds received in excess of losses incurred | |||