Delaware
|
35-1996126
|
(State
or other jurisdiction of incorporation or organization)
|
(I.R.S.
Employer Identification No.)
|
3724
North State Road 15, Warsaw, Indiana
|
46582
|
(Address
of principal executive offices)
|
(Zip
Code)
|
(574)
268-2252
|
|
(Registrant’s
telephone number, including area code)
|
Large
accelerated filer ¨
|
Accelerated
filerþ
|
||
Non-accelerated
filer ¨
(Do not check if a smaller reporting
company)
|
Smaller
reporting
company ¨
|
PART I
FINANCIAL INFORMATION
|
|||
Item 1
|
Financial
Statements:
|
||
Condensed
Consolidated Balance Sheets: As of October 2, 2010 and January 2,
2010
|
4
|
||
Condensed
Consolidated Statements of Operations: Three and Nine Months Ended
October 2, 2010 and October 3, 2009
|
5
|
||
Condensed
Consolidated Statements of Cash Flows: Nine Months Ended October 2, 2010
and October 3, 2009
|
6
|
||
Notes
to Condensed Consolidated Financial Statements
|
7
|
||
Item 2
|
Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
|
15
|
|
Item 3
|
Quantitative
and Qualitative Disclosures about Market Risk
|
21
|
|
Item 4
|
Controls
and Procedures
|
21
|
|
PART II
OTHER INFORMATION
|
|||
Item
1
|
Legal
Proceedings
|
22
|
|
Item 1A
|
Risk
Factors
|
22
|
|
Item 6
|
Exhibits
|
23
|
|
Signatures
|
24
|
October
2,
|
January
2,
|
|||||||
2010
|
2010
|
|||||||
ASSETS:
|
(unaudited)
|
|||||||
Current
Assets:
|
||||||||
Cash
and cash equivalents
|
$ | 13,869 | $ | 14,219 | ||||
Accounts
receivable, net
|
48,322 | 38,221 | ||||||
Inventories
|
72,422 | 62,301 | ||||||
Refundable
income taxes
|
2,904 | 3,048 | ||||||
Deferred
income taxes
|
4,822 | 5,816 | ||||||
Other
current assets
|
3,922 | 3,648 | ||||||
Total
current assets
|
146,261 | 127,253 | ||||||
Property
and equipment, net
|
108,068 | 113,369 | ||||||
Goodwill
|
153,983 | 153,813 | ||||||
Intangible
assets, net of accumulated amortization
|
40,418 | 42,729 | ||||||
Other
assets
|
1,347 | 1,181 | ||||||
Total
Assets
|
$ | 450,077 | $ | 438,345 | ||||
LIABILITIES
AND SHAREHOLDERS' EQUITY:
|
||||||||
Current
Liabilities:
|
||||||||
Accounts
payable
|
$ | 27,765 | $ | 19,494 | ||||
Accrued
wages and benefits
|
7,863 | 7,607 | ||||||
Other
accrued expenses
|
3,231 | 5,113 | ||||||
Accrued
income taxes
|
196 | 257 | ||||||
Deferred
income taxes
|
- | 78 | ||||||
Revolving
line of credit
|
2,415 | 3,320 | ||||||
Derivative
valuation liability
|
1,893 | - | ||||||
Current
portion of capital lease obligations
|
451 | 529 | ||||||
Current
portion of long-term debt
|
1,424 | 20,400 | ||||||
Total
current liabilities
|
45,238 | 56,798 | ||||||
Accrued
income taxes
|
6,534 | 6,362 | ||||||
Deferred
income taxes
|
17,211 | 17,646 | ||||||
Derivative
valuation liability
|
- | 2,982 | ||||||
Capital
lease obligations, less current portion
|
2,540 | 2,887 | ||||||
Long-term
debt, less current portion
|
86,675 | 69,200 | ||||||
Total
Liabilities
|
158,198 | 155,875 | ||||||
Shareholders'
Equity:
|
||||||||
Common
Stock, $.0001 par value; 75,000 shares authorized; shares issued October
2, 2010--35,942; January 2, 2010--35,840
|
4 | 4 | ||||||
Additional
paid-in capital
|
278,985 | 278,176 | ||||||
Retained
earnings
|
9,959 | 277 | ||||||
Accumulated
other comprehensive income (loss)
|
2,931 | 4,013 | ||||||
Total
Shareholders' Equity
|
291,879 | 282,470 | ||||||
Total
Liabilities and Shareholders' Equity
|
$ | 450,077 | $ | 438,345 |
Three
Months Ended
|
Nine
Months Ended
|
|||||||||||||||
October
2,
|
October
3,
|
October
2,
|
October
3,
|
|||||||||||||
2010
|
2009
|
2010
|
2009
|
|||||||||||||
Revenue
|
$ | 91,538 | $ | 87,164 | $ | 264,856 | $ | 289,540 | ||||||||
Cost
of Revenue
|
71,708 | 65,441 | 207,627 | 216,488 | ||||||||||||
Gross
Profit
|
19,830 | 21,723 | 57,229 | 73,052 | ||||||||||||
Selling,
general and administrative expenses
|
12,248 | 10,587 | 37,124 | 37,007 | ||||||||||||
Facility
closure and severance costs
|
57 | 702 | 917 | 864 | ||||||||||||
Operating
Income
|
7,525 | 10,434 | 19,188 | 35,181 | ||||||||||||
Other
(income)/expense:
|
||||||||||||||||
Interest
expense
|
1,504 | 1,666 | 4,565 | 5,050 | ||||||||||||
Derivatives
valuation gain
|
(389 | ) | (178 | ) | (1,177 | ) | (746 | ) | ||||||||
Other
|
715 | 687 | 796 | 379 | ||||||||||||
Income
before income taxes
|
5,695 | 8,259 | 15,004 | 30,498 | ||||||||||||
Income
tax expense
|
2,123 | 2,851 | 5,322 | 9,268 | ||||||||||||
Net
income
|
$ | 3,572 | $ | 5,408 | $ | 9,682 | $ | 21,230 | ||||||||
Net
income per share:
|
||||||||||||||||
Basic
|
$ | 0.10 | $ | 0.15 | $ | 0.27 | $ | 0.60 | ||||||||
Diluted
|
$ | 0.10 | $ | 0.15 | $ | 0.27 | $ | 0.59 | ||||||||
Weighted
average common shares and equivalent shares outstanding:
|
||||||||||||||||
Basic
|
35,456 | 35,326 | 35,449 | 35,301 | ||||||||||||
Diluted
|
35,870 | 35,620 | 35,802 | 35,498 |
Nine
Months Ended
|
||||||||
October
2,
|
October
3,
|
|||||||
2010
|
2009
|
|||||||
Operating
activities
|
||||||||
Net
income
|
$ | 9,682 | $ | 21,230 | ||||
Adjustments
to reconcile net income to net cash provided by operating
activities:
|
||||||||
Depreciation
|
13,576 | 14,281 | ||||||
Amortization
|
2,198 | 2,203 | ||||||
Net
loss on sale of assets
|
103 | 139 | ||||||
Deferred
income tax provision
|
666 | 4,491 | ||||||
Stock-based
compensation
|
693 | 2,035 | ||||||
Derivative
valuation gain
|
(1,177 | ) | (746 | ) | ||||
Foreign
currency transaction loss
|
566 | 204 | ||||||
Change
in operating assets and liabilities:
|
||||||||
Accounts
receivable
|
(10,288 | ) | 11,109 | |||||
Other
assets
|
(506 | ) | 1,419 | |||||
Inventories
|
(10,394 | ) | (3,434 | ) | ||||
Current
income taxes
|
112 | 1,715 | ||||||
Accounts
payable
|
9,093 | (8,511 | ) | |||||
Accrued
expenses and other
|
(2,400 | ) | (6,197 | ) | ||||
Net
cash provided by operating activities
|
11,924 | 39,938 | ||||||
Investing
activities
|
||||||||
Purchases
of property and equipment
|
(9,592 | ) | (13,453 | ) | ||||
Proceeds
from the sale of property and equipment
|
611 | 67 | ||||||
Net
cash used in investing activities
|
(8,981 | ) | (13,386 | ) | ||||
Financing
activities
|
||||||||
Proceeds
from bank revolver
|
43,275 | 76,005 | ||||||
Payments
on bank revolver
|
(32,693 | ) | (83,943 | ) | ||||
Issuance
of long-term debt
|
2,711 | - | ||||||
Payments
on long-term debt and capital lease obligations
|
(16,383 | ) | (13,586 | ) | ||||
Proceeds
from the issuance of common stock
|
99 | 106 | ||||||
Net
cash used in financing activities
|
(2,991 | ) | (21,418 | ) | ||||
Effect
of exchange rate changes on cash
|
(302 | ) | 1,107 | |||||
Net
increase (decrease) in cash and cash equivalents
|
(350 | ) | 6,241 | |||||
Cash
and cash equivalents at beginning of period
|
14,219 | 10,191 | ||||||
Cash
and cash equivalents at end of period
|
$ | 13,869 | $ | 16,432 | ||||
Supplemental
disclosures:
|
||||||||
Cash
paid for interest
|
$ | 4,018 | $ | 5,475 | ||||
Cash
paid for income taxes
|
$ | 3,728 | $ | 3,022 |
October
2,
|
January
2,
|
|||||||
2010
|
2010
|
|||||||
(unaudited)
|
||||||||
Raw
material and supplies
|
$ | 16,194 | $ | 15,099 | ||||
Work-in-process
|
32,155 | 27,120 | ||||||
Finished
goods
|
24,073 | 20,082 | ||||||
$ | 72,422 | $ | 62,301 |
October
2,
|
January
2,
|
|||||||
2010
|
2010
|
|||||||
(unaudited)
|
||||||||
Land
|
$ | 6,673 | $ | 6,965 | ||||
Buildings
and improvements (20 to 40 years)
|
41,489 | 42,252 | ||||||
Machinery
and equipment (5 to 15 years)
|
141,951 | 138,182 | ||||||
Office
equipment (3 to 5 years)
|
13,957 | 13,194 | ||||||
Construction-in-progress
|
6,636 | 3,750 | ||||||
210,706 | 204,343 | |||||||
Less
accumulated depreciation
|
(102,638 | ) | (90,974 | ) | ||||
$ | 108,068 | $ | 113,369 |
Weighted-Average
|
Gross
|
Net
|
||||||||||||
Amortization
|
Intangible
|
Accumulated
|
Intangible
|
|||||||||||
Period
|
Assets
|
Amortization
|
Assets
|
|||||||||||
(unaudited)
|
(unaudited)
|
(unaudited)
|
(unaudited)
|
|||||||||||
Acquired
technology and patents
|
10
years
|
$ | 2,332 | $ | (1,221 | ) | $ | 1,111 | ||||||
Acquired
customers
|
18
years
|
42,550 | (11,049 | ) | 31,501 | |||||||||
Non-compete
agreements
|
5
years
|
591 | (410 | ) | 181 | |||||||||
Intangible
assets subject to amortization
|
17
years
|
45,473 | (12,680 | ) | 32,793 | |||||||||
Proprietary
processes
|
Indefinite
|
3,551 | ||||||||||||
Trademarks
|
Indefinite
|
4,074 | ||||||||||||
Indefinite-lived
intangible assets, other than goodwill
|
7,625 | |||||||||||||
Total
|
$ | 40,418 |
Weighted-Average
|
Gross
|
Net
|
||||||||||||
Amortization
|
Intangible
|
Accumulated
|
Intangible
|
|||||||||||
Period
|
Assets
|
Amortization
|
Assets
|
|||||||||||
Acquired
technology and patents
|
10
years
|
$
|
2,343
|
$
|
(1,020
|
)
|
$
|
1,323
|
||||||
Acquired
customers
|
18
years
|
42,613
|
(9,166
|
)
|
33,447
|
|||||||||
Non-compete
agreements
|
5
years
|
691
|
(420
|
)
|
271
|
|||||||||
Intangible
assets subject to amortization
|
17
years
|
45,647
|
(10,606
|
)
|
35,041
|
|||||||||
Proprietary
processes
|
Indefinite
|
3,586
|
||||||||||||
Trademarks
|
Indefinite
|
4,102
|
||||||||||||
Indefinite-lived
intangible assets, other than goodwill
|
7,688
|
|||||||||||||
Total
|
$
|
42,729
|
Three
Months Ended
|
Nine
Months Ended
|
|||||||||||||||
October
2,
|
October
3,
|
October
2,
|
October
3,
|
|||||||||||||
2010
|
2009
|
2010
|
2009
|
|||||||||||||
(unaudited)
|
(unaudited)
|
|||||||||||||||
United
States
|
$ | 67,508 | $ | 63,207 | $ | 194,436 | $ | 214,527 | ||||||||
Ireland
|
8,544 | 9,234 | 25,058 | 28,532 | ||||||||||||
United
Kingdom
|
6,906 | 7,313 | 20,649 | 22,674 | ||||||||||||
Other
foreign countries
|
8,580 | 7,410 | 24,713 | 23,807 | ||||||||||||
Total
net revenues
|
$ | 91,538 | $ | 87,164 | $ | 264,856 | $ | 289,540 |
Three
Months Ended
|
Nine
Months Ended
|
|||||||||||||||
October
2,
|
October
3,
|
October
2,
|
October
3,
|
|||||||||||||
2010
|
2009
|
2010
|
2009
|
|||||||||||||
(unaudited)
|
(unaudited)
|
|||||||||||||||
Instruments
|
$ | 36,027 | $ | 41,327 | $ | 103,096 | $ | 134,679 | ||||||||
Implants
|
28,332 | 24,237 | 85,058 | 83,255 | ||||||||||||
Cases
|
21,495 | 16,353 | 60,127 | 53,725 | ||||||||||||
Other
|
5,684 | 5,247 | 16,575 | 17,881 | ||||||||||||
Total
net revenues
|
$ | 91,538 | $ | 87,164 | $ | 264,856 | $ | 289,540 |
Three
Months Ended
|
Nine
Months Ended
|
|||||||||||||||
October
2,
|
October
3,
|
October
2,
|
October
3,
|
|||||||||||||
2010
|
2009
|
2010
|
2009
|
|||||||||||||
(unaudited)
|
(unaudited)
|
|||||||||||||||
Earnings
per share - Basic:
|
||||||||||||||||
Net
income
|
$ | 3,572 | $ | 5,408 | $ | 9,682 | $ | 21,230 | ||||||||
Less: Undistributed
earnings allocated to nonvested stock
|
(33 | ) | (69 | ) | (89 | ) | (277 | ) | ||||||||
Income
available to common shares - Basic
|
3,539 | 5,339 | 9,593 | 20,953 | ||||||||||||
Weighted-average
common shares outstanding - Basic
|
35,456 | 35,326 | 35,449 | 35,301 | ||||||||||||
Earnings
per share - Basic
|
$ | 0.10 | $ | 0.15 | $ | 0.27 | $ | 0.60 | ||||||||
Earnings
per share - Diluted:
|
||||||||||||||||
Net
income
|
$ | 3,572 | $ | 5,408 | $ | 9,682 | $ | 21,230 | ||||||||
Less: Undistributed
earnings allocated to nonvested stock
|
- | (24 | ) | - | (163 | ) | ||||||||||
Income
available to common shares - Diluted
|
3,572 | 5,384 | 9,682 | 21,067 | ||||||||||||
Weighted-average
common shares outstanding - Basic
|
35,456 | 35,326 | 35,449 | 35,301 | ||||||||||||
Effect
of dilution
|
414 | 294 | 353 | 197 | ||||||||||||
Weighted-average
common shares outstanding - Diluted
|
35,870 | 35,620 | 35,802 | 35,498 | ||||||||||||
Earnings
per share - Diluted
|
$ | 0.10 | $ | 0.15 | $ | 0.27 | $ | 0.59 |
Three
Months Ended
|
Nine
Months Ended
|
|||||||||||||||
October
2,
|
October
3,
|
October
2,
|
October
3,
|
|||||||||||||
2010
|
2009
|
2010
|
2009
|
|||||||||||||
(unaudited)
|
(unaudited)
|
|||||||||||||||
Net
Income
|
$ | 3,572 | $ | 5,408 | $ | 9,682 | $ | 21,230 | ||||||||
Foreign
currency translation adjustments
|
4,981 | 320 | (1,032 | ) | 5,338 | |||||||||||
Derivative,
net of tax benefit (1)
|
14 | (160 | ) | (50 | ) | (260 | ) | |||||||||
Comprehensive
income
|
$ | 8,567 | $ | 5,568 | $ | 8,600 | $ | 26,308 |
(1)
|
Derivative
gains (losses) are reported net of income tax (expense)/benefit of
($9) and $106 for the three month periods ended October 2, 2010 and
October 3, 2009, respectively, and $35 and $173 for the nine month periods
ended October 2, 2010 and October 3, 2009,
respectively.
|
October
2, 2010
|
January
2, 2010
|
|||||||||||||||||||||||||||||||
Fair
Value Measurements
|
Fair
Value Measurements
|
|||||||||||||||||||||||||||||||
Level
1
|
Level
2
|
Level
3
|
Total
|
Level
1
|
Level
2
|
Level
3
|
Total
|
|||||||||||||||||||||||||
Liabilities
|
||||||||||||||||||||||||||||||||
Interest
rate swaps
|
$ | - | $ | (1,893 | ) | $ | - | $ | (1,893 | ) | $ | - | $ | (2,982 | ) | $ | - | $ | (2,982 | ) | ||||||||||||
$ | - | $ | (1,893 | ) | $ | - | $ | (1,893 | ) | $ | - | $ | (2,982 | ) | $ | - | $ | (2,982 | ) |
Product
Category
|
Three
Months Ended
|
|||||||
October
2,
|
October
3,
|
|||||||
2010
|
2009
|
|||||||
(unaudited)
|
||||||||
Instruments
|
$ | 36.0 | $ | 41.3 | ||||
Implants
|
28.3 | 24.2 | ||||||
Cases
|
21.5 | 16.4 | ||||||
Other
|
5.7 | 5.3 | ||||||
Total
|
$ | 91.5 | $ | 87.2 |
Product
Category
|
Nine
Months Ended
|
|||||||
October
2,
|
October
3,
|
|||||||
2010
|
2009
|
|||||||
(unaudited)
|
||||||||
Instruments
|
$ | 103.1 | $ | 134.7 | ||||
Implants
|
85.1 | 83.2 | ||||||
Cases
|
60.1 | 53.7 | ||||||
Other
|
16.6 | 17.9 | ||||||
Total
|
$ | 264.9 | $ | 289.5 |
Payments
Due By Period
|
||||||||||||||||||||
Total
|
Less
than 1 year
|
1-3
years
|
4-5
years
|
More
than 5 years
|
||||||||||||||||
(In
Millions)
|
||||||||||||||||||||
Long-term
debt obligations
(1)
|
$ | 88.1 | $ | 1.4 | $ | 0.7 | $ | 86.0 | $ | - | ||||||||||
Capital
lease obligations
|
$ | 5.2 | 0.3 | 2.7 | 1.6 | 0.6 | ||||||||||||||
Operating
lease obligations
|
$ | 3.6 | 0.5 | 2.4 | 0.5 | 0.2 | ||||||||||||||
Purchase
obligations (2)
|
$ | 18.8 | 5.8 | 13.0 | - | - | ||||||||||||||
Total
|
$ | 115.7 | $ | 8.0 | $ | 18.8 | $ | 88.1 | $ | 0.8 |
(1)
|
For
purposes of this table, the long-term debt obligations are based upon the
new agreement and represents principal and maturities only and, therefore
excludes the effects of interest and interest rate swaps. Scheduled
payments for our Revolving Credit Facility exclude interest payments as
rates are variable. Borrowings under the Revolving Credit
Facility bear interest at a variable rate based on the London Interbank
Offer Rate (LIBOR) or a base rate determined by the lender's prime rate
plus an applicable margin, as defined in the agreement. The applicable
margin for borrowings under the agreement ranges from 0.75% to 1.75% for
base rate borrowings and 1.75% to 2.75% for LIBOR borrowings, subject to
the Corporation's Leverage Ratio applicable on such
date.
|
(2)
|
For
the purposes of this table, contractual obligations for purchases of goods
or services are defined as agreements that are enforceable and legally
binding and that specify all significant terms, including: fixed or
minimum quantities, fixed, minimum or variable price provisions; and the
approximate timing of the transaction. Our purchase orders are normally
based on our current manufacturing needs and are fulfilled by our vendors
within a short time. We enter into blank orders with vendors that have
preferred pricing terms; however, these orders are normally cancelable by
us without penalty. Amounts predominantly represent purchase agreements to
buy minimum quantities of plastic, cobalt chrome and titanium through
December 2012.
|
10.1
|
Credit
Agreement, dated November 3, 2010, among Symmetry Medical Inc. as
borrower, JPMorgan Chase Bank, N.A. as Administrative Agent, the lenders
identified on the signature pages thereto, Wells Fargo Bank, National
Association as Syndication Agent and Fifth Third Bank, Bank of America,
N.A. and PNC Bank National Association as Co-Documentation Agents
(incorporated by reference to EX-99.1 to our Form 8-K filed November 9,
2010).
|
|||
31.1
|
Certification
of Chief Executive Officer required by Item 307 of Regulation S-K as
promulgated by the Securities and Exchange Commission and pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.*
|
|||
31.2
|
Certification
of Chief Financial Officer required by Item 307 of Regulation S-K as
promulgated by the Securities and Exchange Commission and pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.*
|
|||
32.1
|
Certification
of Chief Executive Officer and Chief Financial Officer pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.*
|
SYMMETRY MEDICAL INC.
|
|||
By
|
/s/ Brian S. Moore
|
||
Brian S. Moore,
|
|||
President and Chief Executive Officer
|
|||
(Principal Executive Officer)
|
|||
By
|
/s/ Fred L. Hite
|
||
Fred L. Hite,
|
|||
Senior Vice President and Chief Financial Officer
|
|||
(Principal Financial Officer)
|
|||