Symmetry Medical first quarter revenue increases 13.4% to $95.8 million

May 5 2011

First Quarter and Recent Highlights:

• Revenue increased 13% year-over-year
• Operating income of $3.1 million; non-GAAP operating income of $5.9 million up 33% year-over-year
• Net income of $1.4 million; non-GAAP net income of $3.2 million up 60% year-over-year
• Centralized businesses under CEO to enhance customer interaction and standardize operations
• Reiterates 2011 financial guidance

Symmetry Medical Inc. (NYSE: SMA), a leading independent provider of products to the global orthopaedic device industry and other medical markets, announced first quarter 2011 financial results for the period ended April 2, 2011.

Revenue for the first quarter 2011 was $95.8 million, up 13.4% compared to $84.5 million in the same period last year.  The year-over-year revenue growth was primarily driven by increased customer shipments in the Company's instruments and cases businesses.

Gross profit for the first quarter 2011 was $19.3 million, up 13.4% compared to $17.0 million in the same period last year.  Gross margin percentage for the first quarter 2011 and first quarter 2010 was 20.2%.  Gross profit in the first quarter 2011 was impacted by additional costs incurred to support customer service, and the Company's continued investment in quality and regulatory services.  These factors were offset by higher revenue in the first quarter 2011.  

Selling, general and administrative expenses in the first quarter 2011 were $15.6 million, compared to $12.6 million in the same period last year. The increase in selling, general and administrative expenses in the first quarter 2011 was primarily due to employee compensation related to management transition, increased research and development expenses, direct sales activities at the SSI distribution unit, as well as an increase in sales commissions related to higher revenue.  Facility closure and severance costs were $0.6 million in the first quarter of 2011, compared to $0.5 million in the same period last year.

Operating income for the first quarter 2011 was $3.1 million, compared to $3.9 million in the same period last year. Operating margin for the first quarter 2011 was 3.3%, compared to 4.6% in the same period last year. Excluding the management transition costs, facility consolidation expenses and employee severance payments referenced above, operating income for the first quarter 2011 was $5.9 million, compared to $4.4 million in the same period last year.

The first quarter 2010 included a non-cash gain of $0.3 million for the mark to market of the Company's interest rate derivative.  All existing interest rate derivative instruments were unwound during November 2010 in connection with the Company's debt refinancing activities and therefore there was no such gain in the first quarter 2011.

Income tax expense for the first quarter 2011 was $0.7 million, compared to income tax expense of $0.8 million in the same period last year.  

Net income for the first quarter 2011 was $1.4 million, or $0.04 per diluted share, compared to $1.6 million, or $0.05 per diluted share, in the same period last year. Excluding the management transition costs, facility consolidation expenses and employee severance payments referenced above, net income for the first quarter 2011 was $3.2 million, or $0.09 per diluted share, compared to $0.06 in the same period last year.

The weighted average number of diluted shares outstanding during the first quarter of 2011 was 35,991,317.

Thomas J. Sullivan, President and Chief Executive Officer of Symmetry Medical, stated, "Symmetry has a sound business model and is well positioned for further success in what I strongly believe is a dynamic segment of healthcare.  With the financial flexibility enabled by our recent debt refinancing, we have the resources to grow as the preeminent provider to the orthopedic community, as well as make strategic growth investments in adjacent healthcare segments.  On the operational front, one of my key initiatives has been to drive a relentless focus on excellence in all areas of our business, with particular attention to providing best-in-class quality and customer service. While I have been impressed with the Symmetry Quality System, following my review of our operations, I identified customer service as an area that did not meet my expectations for Symmetry and our reputation as a best-in-class service provider. To that end, we recently announced a reorganization of our management structure that will allow us to enhance the customer experience by increasing responsiveness, streamlining our sales structure and providing a uniform quality system for all our products. During the quarter, we also increased our focus on customer collaboration and supporting our customers' product launch timelines and product needs. These investments will solidify our leadership position in the market and over the long-term will position Symmetry to benefit by gaining more of our customers' business. At SSI, our direct to hospital business, we continued to broaden our product portfolio and maintained double digit growth."

Financial Guidance

The following forward-looking estimates regarding 2011 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.  

For the full year 2011, the Company is reiterating its financial guidance.  The Company expects revenue to be in the range of $363 million to $383 million. The Company expects full year 2011 GAAP earnings per diluted share to be in the range of $0.50 to $0.58 and full year 2011 non-GAAP earnings per diluted share to be in the range of $0.57 to $0.65.  The non-GAAP earnings per diluted share guidance excludes the impact of management transition expenses which are expected to negatively impact full year 2011 GAAP earnings per diluted share by approximately $0.07.