Symmetry Medical (SMA)

Q1 2010 Earnings Call

May 06, 2010 05:00 am ET

Executives

Carol Ruth - IR, The Ruth Group

Brian Moore - President, CEO and Director

Fred Hite - SVP, CFO and IR Officer

Analysts

Matt Miksic - Piper Jaffray

James Sidoti - Sidoti

Michael Matson - Wells Fargo Securities

Presentation

Operator

Operator: Good day ladies and gentlemen and welcome to the first quarter 2010 Symmetry Medical Incorporated earnings conference call. My name is Michael and I will be your coordinator for today. At this time all participants are in listen-only mode. We will be facilitating a question-and-answer session towards the end of this conference. [Operator Instructions]. As a reminder this call is being recorded for replay purposes.

I would now like to turn the presentation over to your host for today's conference Ms. Carol Ruth of the Ruth Group. You may proceed.

Carol Ruth

Thank you operator. Joining us on the call are Brian Moore, President and Chief Executive Officer and Fred Hite, Senior Vice President and Chief Financial Officer.

Statements made in this conference call regarding Symmetry Medical business which are not historical facts may be forward-looking statements that involve risks and uncertainties within the Safe Harbor provision of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are predictive in nature and are non-frequently identified by the use of terms such as may, will, should, expect, believe, anticipate, plan, may intend and similar words indicating possible future expectations, events or actions.

Such predicative statements are not guarantees of future performance and actual results and outcomes could differ materially from our current expectations. Factors that could cause or contribute to such differences include, but are not limited to, the loss of one or more customers, the development of new products or product innovation by our competitors, product liability, changes in management, changes in conditions affecting the economy, orthopedic device manufacturers, or the medical device industry in general and changes in government regulation of medical devices and third party reimbursement practices.

We refer you to the risk in the forward-looking statements sections of the company's most recent annual report on Form 10-K, filed with the Security and Exchange Commission, as well as the company's other filings with the SEC, which are available on the SEC's website at www.sec.gov.

Before turning the call over to President and Chief Executive Officer, Brian Moore, I'd like to emphasize Symmetry Medical's policy of not commenting or discussing individual customers or programs. Brian?

Brian Moore

Thank you, Carol and thank you everyone for joining us on our first quarter 2010 investor conference call. We're pleased to report that our first quarter 2010 results came in ahead of our expectations and this reflects the improved orthopedic industry demand and our cost control initiatives. Our sequential revenue growth rates of a 11% from the prior quarter demonstrates continuous stabilization for our operations driven by stronger order flow in our core orthopedic business and robust growth from our SSI direct sales efforts.

Looking forward, we're cautiously optimistic as inventory corrections move behind us and larger OEM customers increase their sales and marketing activity. As you are aware the slow or (inaudible) environment over the last several quarters gave us an opportunity to strengthen our strategic customer relationships while maintaining our global infrastructure and capacity. This strategy has provided us with a competitive advantage with enhanced services and the ability to quickly respond to any rapid return in demand.

Given the encouraging start to 2010, we are increasing full year revenue guidance to a range of $330 million to $340 million up from $320 to $330 million and then EPS range of $0.45 to $0.50 up from $0.43 to $0.50. Our facility rationalization is on track and we expect to complete the consolidation of our oven case and trade operation to other existing case and trade facilities by the end of second quarter 2010 when we start to realize the majority of our anticipated $2.2 million cost savings per annum run rate.

As outlined on last quarter's call, these consolidation steps are expected to achieve annualized cost savings in the order of $3.4 million beginning in second half of 2010.

As we move through 2010, we will continue to deal all aspects of our operation to drive increased profitability and achieve further operating leverage as our customer demand improves. In addition to improvements in our core orthopedics business, we have made notable progress in expanding our non-orthopedic direct sales operation at SSI (inaudible).

The team with SSI is doing an excellent job building on brand recognition to establish a global distribution network supported by a US direct sales force. This aggressive approach led SSI to achieve record sales during the first quarter. We expect this momentum to continue following our launch of a dedicated website in the second quarter that will enable SSI to sell directly to our global customer base.

On our fourth quarter 2009 call, we mentioned new investments in sales, marketing and our new product line.

During the first quarter we started to increase our expansion in this area and recently appointed [José Hernández] as new SVP of new product development to spearhead our new product development activities. He will lead a focused team responsible for new product creation to complement all parts of our operation with an emphasis on products and intellectual property creation. José is an industry veteran who join Symmetry with multiple years of new product development experience within the orthopedic and spine market.

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