Symmetry Medical (NYSE:SMA) put some red ink into its ledgers during the 3rd quarter as it struggled to integrate a pair of acquisitions and recovered from a fire in a British plant that destroyed part of the facility.
Warsaw, Ind.-based Symmetry reported losses of $34.5 million, or 95¢ per share, on sales of 98.0 million for the 3 months ended 28, compared with profits of 3.7 million, or 10¢ per share, on sales of $100.9 million during the same period last year. That’s a top-line slide of 2.9% year-on-year.
The net loss was largely due to a $51.6 million writedown due to continuing issues with its Clamonta Ltd. aerospace subsidiary and the fire that destroyed the acid shop facility in Sheffield, England, Sept. 13, according to a press release.
Symmetry said some $19.8 million of the writedown was due to ongoing problems with the integration of Johnson & Johnson‘s (NYSE:JNJ) surgical instruments subsidiary Codman & Shurtleff, which Symmetry acquired for $165 million in December 2011. Adjusted to exclude the writedown and other 1-time items, earnings per share were 8¢, a penny ahead of expectations on Wall Street.
"As previously announced, our 3rd-quarter results were impacted by several unexpected factors and revenue weakness. We are disappointed with the results and have been working to address the issues. In our Sheffield plant, our temporary acid shop facility is now operational and has been validated by some of our customers, thus enabling resumption of normal operations. We continue to work closely with the leadership team at our Clamonta Ltd. subsidiary to address the operational issues. While we have made good progress on both fronts, we expect the negative impact on the OEM solutions segment revenue and gross margin to continue in the 4th quarter, along with continued lower than expected Instruments volume. While we are pleased with stabilization in Symmetry Surgical’s U.S. operations, the parallel process in our international business is taking longer than anticipated," president & CEO Thomas Sullivan said in prepared remarks. "Despite some near-term issues, we remain confident in the long-term outlook for our business. In our OEM solutions business, we are positioned to increase revenue as customers consolidate their business to fewer, strategic partners and increase implant outsourcing. Additionally, our Symmetry business system and an increase in volume should further improve segment gross margins. We are beginning to see some positive signs of improvement in orthopedic procedure volumes, which is a tailwind for our business. Relative to the Symmetry Surgical segment, we believe our comprehensive product portfolio and broad sales coverage will allow us to achieve above market growth once we have moved past the market share losses incurred during this transition phase. On the financial front, we remain committed to reducing our debt and refinancing to lower interest rates."
Symmetry lowered its sales and earnings outlook for the year, saying it now expects to post losses per share of -94¢ to -90¢ and adjusted EPS of 28¢-32¢, down from EPS of 14¢-24¢ and adjusted EPS of 40¢-50¢. Revenues are now pegged at $398 million to $402 million, down from prior guidance of $400 million to $415 million.
SMA shares were trading at $7.87 apiece as of about 10:30 a.m. today, down 2.6%.