Symmetry Medical’s (SMA) second-quarter adjusted earnings per share of 14 cents beat the Zacks Consensus Estimate of 11 cents, but were considerably below the year-ago earnings of 25 cents.
Adjusted earnings exclude facility consolidation costs and employee severance payments. Net income plummeted 50% year-over-year to $4.5 million (or 13 cents a share) due to a double-digit revenue decline.
Revenues dipped 12% year-over-year to $88.8 million, due to lower sales across major business segments. However sales were ahead of the Zacks Consensus Estimate of $86 million. By product lines, surgical instruments and orthopedic implant sales were off 25% and 5% year-over-year to $35.4 million and $28.5 million, respectively.
This was partly offset by a 5% growth in revenues from orthopedic, endoscopy and dental cases, which reached $19.8 million. Other revenues declined 4% to $5.1 million. However, sales from instruments, implants and cases improved sequentially, favored by higher demand.
Symmetry’s margins contracted in the quarter. Gross margin fell to 22.9% from 26.5% a year-ago given lower sales. Operating margin declined to 8.7% from 13.4% a year-ago due to the hefty facility closure and employee severance costs.
Symmetry exited the first-half fiscal 2010 with cash and cash equivalents of roughly $9.8 million, down 47% year over year and 6% sequentially. Total long-term debt declined 4% sequentially and 25% year over year to $85.7 million.
Symmetry raised its revenue guidance for fiscal 2010 to between $340 million and $350 million from the earlier forecast of $330 million to $340 million. This is based on a favorable foreign exchange impact, current inventory levels and product launches by customers. However, the earnings per share target remains in the range of 45 to 50 cents. The current Zacks Consensus Estimate is 49 cents.
Symmetry is the largest OEM provider of orthopedic implants and instruments to orthopedic devices manufacturers. The company has created a distinct competitive niche in the orthopedic devices market with its “Total Solutions Approach”.
Under this strategy, customers are provided with a broad range of products relating to orthopedic implants as well as comprehensive services and production capabilities to bring these implant systems to the market in a timely and cost-efficient manner.
Symmetry Medical has diversified its offerings into areas outside of orthopedics, like dental, osteobiologic and endoscopy. Currently, we have a Neutral recommendation on Symmetry Medical.