Symmetry Disappoints, Lowers Outlook

Symmetry Medical, Inc. (SMA - Analyst Report) reported third-quarter earnings per share of 15 cents that came in a penny shy of the Zacks Consensus Estimate. However, earnings came ahead of last year’s figure of 7 cents.
 
Sales
 
Total sales in the reported quarter declined 22% year over year to $87.2 million. The decline was due to lower customer demand across all the business segments as a result of the economic turbulence. Patients are deferring elective procedures as they are not life sustaining in nature.
 
Instruments revenues declined 15% year over year to $41.3 million. Implants revenues declined 23% year over year to $24.2 million. Both Cases and Other sales registered a decline of 29% and 40%, respectively. 
 
Margins
 
Symmetry registered an expansion in margins due to its strong cost-cutting initiatives. Operational improvements at the Sheffield, UK unit also helped in improving margins. Gross margin in the reported quarter increased 150 basis points (bps) year over year to 24.4%.
 
Selling, general and administrative (SG&A) expenses as a percentage of sales declined 110 bps year over year to 12.4%. Strong gross margin coupled with lower SG&A expenses as a percentage of sales helped in improving the operating and net margins. Operating margin improved 260 bps year over year to 12.0%. Net margin improved 390 bps year over year to 6.2%.
 
Balance Sheet
 
Symmetry ended the quarter with cash and cash equivalents of $16.4 million, an increase of 61% year over year. The company’s outstanding debt stood at approximately $101.2 million at the end of the quarter.
 
Guidance
 
Symmetry lowered revenues and earnings per share guidance for the full fiscal 2009. It expects revenues in the range of $355 to $365 million, lower than the prior guidance of $385 to $405 million. Earnings per share is projected between 63 and 68 cents, compared to the prior guidance of 77 to 85 cents.
 
Symmetry Medical is the largest original equipment manufacturer (OEM) provider of orthopedic implants and instruments to orthopedic device manufacturers. The company has created a distinct competitive position in the orthopedic device market with its Total Solutions approach. Under the approach, 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 from the drawing board design stage to commercialization in a timely and cost efficient manner.