CEO: Symmetry Medical encouraged by industry environment
Symmetry Medical Inc. (NYSE:SMA) CEO Brian Moore said the orthopedic maker is “encouraged” by the industry environment and his firm’s momentum. Moore made the comments during a Tuesday morning conference call with analysts and investors.
The Warsaw, Ind.-based company said in a Tuesday morning release that it expects fiscal 2008 revenue of between $395 million to $405 million, up from a previous range of $350 million to $360 million. The new revenue range is greater than Wall Street analysts’ projection of $359.2 million.
Symmetry also said it expects fiscal 2008 earnings to range from $0.75 to $0.77 a share. Wall Street only expects $0.72 per share. The earnings guidance factor in $3 million in professional fees related to an accounting investigation, CFO Fred Hite said.
Symmetry said reasons for the raised outlook include current market conditions and order flow, foreign currency rates, anticipated customer demand and improved operations at its Sheffield, U.K.-based facility. The firm expects to incur a loss at the Sheffield plant during the second and third quarters, but turn to a profit during the fourth quarter.
Hite said Symmetry anticipates ending fiscal 2008 with gross margins of about 27%. He said the gross margin improvement will be powered by the improved operations at its Sheffield site and improved profitability at its other facilities.
Symmetry reported early Tuesday that its first-quarter revenue rose 57% to $101.9 million, from $64.7 million a year earlier. The results topped Wall Street’s expectation of $88.4 million.
“We’re very pleased with the record revenues generated in the first quarter, which demonstrates the strong demand we are experiencing throughout the orthopedic business,” Moore said. “But we are, however, looking forward to better bottom-line performance.”
For the three months ended March 29, Symmetry’s profit more than doubled to $4 million, or $0.11 per share, up from $1.6 million, or $0.05 per share, a year ago. The quarterly net income total missed Wall Street’s expectation of earning $0.14 a share. Symmetry had a favorable $0.3 million impact due to currency exchange rates during the quarter.
Selling, general and administrative expenses during the first quarter jumped 87% to $14.4 million from $7.7 million a year ago. Symmetry blamed the increased costs on $2.2 million in professional fees related to a review of accounting irregularities at its Sheffield, U.K. facility and $2.7 million in acquisition-related expenses.
“We are aggressively addressing the operational issues at Sheffield and believe that a number of our initiatives are showing results,” Moore said.
During the accounting audit, Moore said Symmetry identified several areas to improve profitability at the Sheffield location. First, the facility needed to improve customer service and fulfill orders that were already due, which he said has been “largely achieved.” The more responsive customer service and order fulfillment has led several customers to pledge more business, the CEO said.
To improve performance, Moore said the company aims to improve efficiency in its material procurement operations at Sheffield. To achieve this, Symmetry hired a specialist executive to focus on the procurement objective. Symmetry also plans to increase prices to offset significantly higher costs, the chief executive said.
Gross profit during the quarter more than doubled to $23.9 million from $11.7 million during the same period of 2007. The quarterly cost of revenue increased 47% to $77.9 million, versus $53 million a year ago.
Hite said Symmetry’s facility capacity utilization rate for its core business was around 80% for the quarter.
“Within that 80%, there’s obviously buckets where we’re running full out on some particular machines, but overall it’s increased significantly from where it was probably a year ago — down in that 65% range,” Hite said.
Hite said Symmetry expects to be back on a normal financial reporting schedule for the second quarter. The company plans to release results during the first or second week of August, the chief financial officer said. The firm’s financial reporting had previously been delayed by accounting irregularity issues.
In midday trading, SMA is up 8.13% to $16.09.
