Symmetry Medical Reports Third Quarter 2012 Financial Results Continued Debt Reduction; Leverage Ratio at 3.7x Third Quarter Highlights: oRevenue of $100.9 million, up 20% year-over-year oGross margin of 28.0% compared to 18.7% year ago oOperating income of $10.2 million; as adjusted operating income of $14.0 million, up 226% year-over-year and 16% sequentially oNet income of $3.7 million; as adjusted net income of $6.5 million, up 183% year-over-year and 30% sequentially oGenerated strong cash from operations of $15.3 million oNarrows 2012 revenue and EPS guidance WARSAW, Ind., Nov. 1, 2012 (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 third quarter 2012 financial results for the period ended September 29, 2012. Third Quarter Vs Prior Quarter (in millions, except per share 2012 2011 Change 3Q'12 2Q'12 Change data) Revenue $100.9 $84.0 20% $100.9 $ 102.3 -1% Operating income 10.2 1.7 500% 10.2 8.1 26% Net income 3.7 0.5 640% 3.7 1.6 131% EPS $0.10 $0.01 900% $0.10 $0.05 100% As Adjusted Non-GAAP* Operating $14.0 $4.3 226% $14.0 $12.1 16% income* Net income* 6.5 2.3 183% 6.5 5.0 30% EPS* $0.18 $0.06 200% $0.18 $0.14 29% * Excludes non-cash charges for stock compensation expense, amortization of intangible assets and debt issuance costs, as well as charges for management transition costs, acquisition related costs, facility closure and severance, SEC related legal costs and legal entity restructuring costs.See "As Adjusted Financial Measures" below. (in millions, except per Third Quarter Vs Prior Quarter share data) Revenue by Product: by 2012 2011 Change 3Q'12 2Q'12 Change Segment OEM Solutions Revenue Instruments $29.6 $24.8 19% $29.6 $28.5 4% Implants 25.6 26.7 -4% 25.6 25.1 2% Cases 14.2 15.9 -11% 14.2 14.5 -2% Other 6.7 6.1 10% 6.7 6.9 -3% Total OEM Solutions Revenue $76.1 $73.5 4% $76.1 $75.0 1% Symmetry Surgical Revenue 24.8 10.5 136% 24.8 27.3 -9% Total Revenue $100.9 $84.0 20% $100.9 $ 102.3 -1% Revenue for the third quarter 2012 was $100.9 million, up 20.1% compared to $84.0 million in the same period last year. The year-over-year revenue increase was driven by growth in the Company's OEM Solutions and Symmetry Surgical segments. Symmetry Surgical segment results for the third quarter 2012 included the Company's December 2011 acquisition of the surgical instruments business of Codman & Shurtleff, Inc. and its August 2011 acquisition of Olsen Medical. The increase in revenue in the Company's OEM Solutions segment to $76.1 million in the third quarter 2012 from $73.5 million in the third quarter 2011 was primarily driven by increased spending on instruments by OEM customers in support of new product launches, partially offset by continued weaker case customer demand. Third quarter 2012 OEM Solutions segment revenue was also impacted by $1.4 million, or -1.9%, due to the unfavorable impact of foreign currency exchange rates. On a sequential basis, third quarter 2012 OEM Solutions revenue was up 1.4% compared to the second quarter 2012, driven by increased demand in the Instruments and Implant categories, in-line with the Company's expectations and indicative of the stable procedure growth reported by the Company's OEM customers during the third quarter 2012. The increase in revenue from the Company's Symmetry Surgical segment to $24.8 million in the third quarter 2012 from $10.5 million in the third quarter 2011 was primarily due to the inclusion of $13.7 million of revenues from the Company's acquisition of the surgical instruments business of Codman & Shurtleff, Inc. and Olsen Medical. Excluding these acquisitions, Symmetry Surgical segment revenue increased 5.7% year-over-year and decreased 9.1% sequentially. Gross profit for the third quarter 2012 was $28.2 million, up 79.2% compared to $15.8 million in the same period last year. Gross margin percentage for the third quarter 2012 was 28.0%, compared to 18.7% in the third quarter 2011. The increase in gross margin was driven by a larger percentage of revenue from the Company's higher margin Symmetry Surgical segment. Gross margin also benefitted from improvements to OEM Solutions gross margin, which were driven by increased leveraging of overhead costs due to higher sales volume, improvements in scrap and consumables, and efficiencies resulting from the Company's lean initiatives. Sales, marketing, general and administrative expenses in the third quarter 2012 were $16.8 million, compared to $12.9 million in the same period last year. The increase in the third quarter 2012 was primarily due to the inclusion of $3.4 million of expenses related to the acquisitions of Olsen Medical and the surgical instruments business of Codman & Shurtleff, Inc. Additionally, intangible assets were acquired with both these acquisitions which resulted in an increase of $1.3 million in amortization expense. The third quarter 2012 also included a $0.8 million increase in stock compensation expense and a $0.2 million increase in acquisition related costs compared to the prior year. These increases were partially offset by the reduction of $0.4 million in management transition expenses and $0.4 million in SEC-related legal costs from the same period last year. Facility closure and severance costs were a benefit of $0.1 million in the third quarter of 2012, compared to costs of $0.3 million in the same period last year. Operating income for the third quarter 2012 was $10.2 million, up 512.0% compared to $1.7 million in the same period last year. Operating margin was 10.1% in the third quarter 2012, compared to 2.0% in the same period last year. Excluding amortization of intangible assets, stock compensation expense, acquisition related costs, management transition costs, SEC-related legal costs, facility closure and severance costs, and legal entity restructuring costs, operating income for the third quarter 2012 was $14.0 million, up 228.9% compared to $4.3 million in the same period last year primarily driven by significantly improved gross margin in the OEM Solutions segment as well as the impact of the Codman surgical instruments and Olsen acquisitions. Interest expense for the third quarter 2012 was $4.7 million, compared to interest expense of $1.0 million in the same period last year.This increase was driven by incremental debt utilized to complete the Codman surgical instruments acquisition in December 2011. Income tax expense for the third quarter 2012 was $1.9 million, compared to income tax expense of $0.3 million in the same period last year driven by the increase in pre-tax income. Net income for the third quarter 2012 was $3.7 million, or $0.10 per diluted share, compared to net income of $0.5 million, or $0.01 per diluted share, in the same period last year. Excluding amortization of intangible assets and debt issuance costs, stock compensation expense, acquisition related costs, management transition costs, SEC-related legal costs, facility closure and severance costs, and legal entity restructuring costs referenced above, net income for the third quarter 2012 was $6.5 million, or $0.18 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 third quarter of 2012 was 36,512,341. Thomas J. Sullivan, President and Chief Executive Officer of Symmetry Medical, stated, "Our third quarter results were in-line with our expectations, reflecting low single digit orthopedic procedure volume growth and continued margin improvement from our strategic operational initiatives. We generated strong cash flow and continued to pay down our debt. In our core OEM Solutions segment, our Symmetry Business System and cost containment initiatives resulted in margin expansion versus the year ago period. In our Symmetry Surgical segment, we achieved the significant milestone of fully integrating the U.S. operations of the recently acquired Codman surgical instruments business into our ERP infrastructure and Symmetry Surgical facility in Nashville, TN.We also continued our global rollout with the successful conversion away from our Johnson & Johnson transitional services agreements into direct relationships with distributors in Hong Kong, Puerto Rico, Chile, and Taiwan. "Heading into the fourth quarter, orthopedic procedure growth remains stable, but it did not slightly accelerate as we had expected, and our OEM customers continue to be restrained with their capital spending and the ramp of new product launches. In addition, as some have announced, we expect OEM customers to employ conservative inventory management strategies heading into the end of the year that could impact our fourth quarter results. Accordingly, we are narrowing our full year 2012 guidance to a tighter range, with revenue now expected to be $410 to $415 million, with a corresponding tightening of as adjusted EPS guidance to $0.55 to $0.60." Financial Guidance The following forward-looking estimates regarding 2012 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 third quarter 2012 results, the Company is refining its full year 2012 revenue and earnings per share guidance. For the full year 2012, the Company expects revenue to be in the range of $410 million to $415 million, compared to the previous guidance of $410 million to $425 million. The Company expects full year 2012 GAAP earnings per diluted share to be in the range of $0.26 to $0.31 and full year 2012 as adjusted* earnings per diluted share to be in the range of $0.55 to $0.60. This compares to the previous full year 2012 guidance of GAAP earnings per diluted share in the range of $0.30 to $0.40 and as adjusted* earnings per diluted share in the range of $0.55 to $0.65. 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, legal entity restructuring costs, SEC-related legal costs, management transition costs, and facility closure and severance costs. These items are expected to negatively impact full year 2012 GAAP earnings per diluted share by approximately $0.29. Diluted earnings per share – GAAP $0.26 - $0.31 Estimated Amortization ($0.17) Estimated stock compensation expense ($0.07) Estimated all other adjustments ($0.05) Diluted earnings per share – as adjusted* $0.55 - $0.60 Conference Call Symmetry Medical will host a conference call to discuss third quarter 2012 financial results at 8:00 a.m. ET on November 1, 2012. 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 (888) 771-4371 for domestic callers and (847) 585-4405 for international. The confirmation number for both is 33565480 (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 February 1, 2013. In addition, a telephonic replay of the call will be available until November 8, 2012. The replay numbers are (888) 843-7419 for domestic callers and (630) 652-3042 for international callers. Please use passcode 3356 5480#. 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, stock compensation expense, acquisition related costs, legal entity restructuring costs, SEC-related legal costs, management transition costs, and facility closure and severance costs. 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 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 Three Months Ended Nine Months Ended September 29, October 1, September 29, October 1, 2012 2011 2012 2011 (In Thousands, Except Per Share Data) (unaudited) Revenue $100,929 $84,039 $303,949 $274,538 Cost of revenue 72,703 68,285 223,808 217,233 Gross profit 28,226 15,754 80,141 57,305 Research and development 1,293 966 2,998 3,031 expenses Sales and marketing expenses 6,107 4,140 19,868 13,354 General and administrative 10,730 8,733 32,331 26,084 expenses Facility closure and (76) 253 596 2,526 severance Operating income 10,172 1,662 24,348 12,310 Other (income) expense: Interest expense 4,737 964 14,905 2,754 Derivatives valuation gain (116) -- (179) -- Other (108) (160) (562) 591 Income before income taxes 5,659 858 10,184 8,965 Income tax expense 1,921 331 3,980 2,901 Net income $3,738 $527 $6,204 $6,064 Net income per share: Basic $0.10 $0.01 $0.17 $0.17 Diluted $0.10 $0.01 $0.17 $0.17 Weighted average common shares and equivalent shares outstanding: Basic 36,044 35,546 35,951 35,537 Diluted 36,512 36,021 36,360 36,000 Symmetry Medical Inc. Consolidated Balance Sheets In Thousands September 29, December 31, 2012 2011 (unaudited) ASSETS: Current Assets: Cash and cash equivalents $12,366 $18,931 Accounts receivable, net 53,035 51,835 Inventories 72,872 84,678 Refundable income taxes 3,866 5,090 Deferred income taxes 10,290 7,535 Derivative valuation asset 179 -- Other current assets 4,005 4,863 Total current assets 156,613 172,932 Property and equipment, net 100,760 103,363 Goodwill 228,783 229,112 Intangible assets, net of accumulated amortization 118,414 124,276 Other assets 8,203 9,182 Total Assets $612,773 $638,865 LIABILITIES AND SHAREHOLDERS' EQUITY: Current Liabilities: Accounts payable $26,655 $23,343 Accrued wages and benefits 11,786 7,637 Other accrued expenses 7,366 5,825 Accrued income taxes 67 522 Current portion of derivative valuation liability 495 -- Deferred income taxes -- 39 Revolving line of credit 718 6,567 Current portion of capital lease obligations 522 483 Current portion of long-term debt 11,111 5,904 Total current liabilities 58,720 50,320 Accrued income taxes 6,981 6,844 Deferred income taxes 19,989 18,459 Derivative valuation liability, less current 3,868 -- portion Other liabilities 654 619 Capital lease obligations, less current portion 1,514 1,907 Long-term debt, less current portion 210,777 259,317 Total Liabilities 302,503 337,466 Shareholders' Equity: Common Stock, $.0001 par value; 75,000 shares authorized; shares issued September 29, 4 4 2012--36,788; December 31, 2011--36,426 Additional paid-in capital 286,619 283,071 Retained earnings 23,344 17,140 Accumulated other comprehensive income 303 1,184 Total Shareholders' Equity 310,270 301,399 Total Liabilities and Shareholders' Equity $612,773 $638,865 Reconciliation of As Adjusted Financial Measures Three Months Ended September 29, June 30, October 1, 2012 2012 2011 (In Thousands, Except Per Share Data) (unaudited) Operating income, as reported $10,172 $8,114 $1,662 Adjustments: Amortization of intangible 2,017 2,008 722 assets Stock Compensation expense* 1,126 1,003 307 Management transition costs 58 58 477 Acquisition related costs** 635 264 475 SEC-related legal costs*** -- 12 356 Facility closure and severance (76) 299 253 Legal entity restructuring**** 54 315 -- Operating income, as adjusted $13,986 $12,073 $4,252 Net income, as reported $3,738 $1,636 $527 Adjustments: Amortization of intangible 1,311 1,305 469 assets Amortization of debt issuance 295 315 57 costs Stock Compensation expense* 732 652 200 Management transition costs 38 38 310 Acquisition related costs** 413 172 309 SEC-related legal costs*** -- 8 231 Facility closure and severance (49) 194 164 Legal entity restructuring**** 35 630 -- Net income, as adjusted $6,513 $4,950 $2,267 Earning per diluted share, as $0.10 $0.05 $0.01 reported Impact of adjustments 0.08 0.09 0.05 Earning per diluted share, as $0.18 $0.14 $0.06 adjusted * Stock compensation expense is included in two adjustment categories; stock compensation expense and management transition costs.Management transition costs for the three months ended October 1, 2011 included stock compensation expense of $226. ** Third quarter 2012 represents acquisition costs of$635.Second quarter 2012 and third quarter 2011 include $173 and $189, respectively, of acquisition costs; $91 and $286, respectively, of non-cash purchase accounting inventory step-up amortization. *** Second quarter 2012 and third quarter 2011 include professional fees associated with the informal SEC inquiry which concluded in early 2012. **** Legal entity restructuring during the second and third quarters of 2012 include professional fees, foreign currency impact and a net unfavorable income tax impact. CONTACT: Symmetry Medical Inc. Fred L. Hite Senior Vice President Chief Financial Officer (574) 371-2218 Investors and Media: The Ruth Group Zack Kubow (646) 536-7020 email@example.com
Symmetry Medical Reports Third Quarter 2012 Financial Results
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