UNITED
STATES


SECURITIES AND EXCHANGE
COMMISSION


Washington, D.C.
20549





FORM
10-Q





QUARTERLY REPORT PURSUANT TO
SECTION 13 OR 15(d)


OF THE SECURITIES EXCHANGE
ACT OF 1934





For the quarterly period
ended July 3, 2010





Commission File Number:
001-32374





SYMMETRY MEDICAL
INC.


(Exact name of registrant as
specified in its charter)





Delaware
                          
                          35-1996126(State
      or other jurisdiction of incorporation or organization)
                            
                            3724
      North State Road 15, Warsaw, Indiana
                          
                          (I.R.S.
      Employer Identification No.)
                            
                            46582(Address
      of principal executive offices)
                            
                            (574)
      268-2252
                          
                          (Zip
      Code)(Registrant’s
      telephone number, including area code)





Indicate by check mark
whether the registrant (1) has filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days.þYes ̈No





Indicate by check mark
whether the registrant has submitted electronically and posted on its corporate
Web site, if any, every Interactive Data File required to be submitted and
posted pursuant to Rule 405 of Regulation S-T (S232.405 of this chapter) during
the preceding 12 months (or for such shorter period that the registrant was
required to submit and post such files).


 ̈Yes ̈No





Indicate by checkmark whether
the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated filer, or a smaller reporting company. See the definitions of
“large accelerated filer,” “accelerated filer” and “smaller reporting company”
in Rule 12b-2 of the Exchange Act.





Large
      accelerated filer ̈
            
            Accelerated
      filerþNon-accelerated
      filer ̈
      (Do not check if a smaller reporting company)
            
            Smaller
      reporting company ̈





Indicate by check mark
whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act). ̈YesþNo





The number of shares
outstanding of the registrant’s common stock as of August 3, 2010 was35,943,638shares.





TABLE
OF CONTENTS





PART I
      FINANCIAL INFORMATIONItem 1
                                                                                          Financial
      Statements:Condensed
      Consolidated Balance Sheets: As of July 3, 2010 and January 2,
      2010
                                                                                          
                                                                                          4Condensed
      Consolidated Statements of Operations: Three and Six Months Ended
      July 3, 2010 and July 4, 2009
                                                                                          
                                                                                          5Condensed
      Consolidated Statements of Cash Flows: Six Months Ended July 3, 2010 and
      July 4, 2009
                                                                                          
                                                                                          6Notes
      to Condensed Consolidated Financial Statements
                                                                                          
                                                                                          7Item 2
                                                                                          Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations
                                                                                          
                                                                                          13Item 3
                                                                                          Quantitative
      and Qualitative Disclosures about Market Risk
                                                                                          
                                                                                          19Item 4
                                                                                          Controls
      and Procedures
                                                                                          
                                                                                          19PART II
      OTHER INFORMATIONItem
      1
                                                                                          Legal
      Proceedings
                                                                                          
                                                                                          19Item 1A
                                                                                          Risk
      Factors
                                                                                          
                                                                                          20Item
      5
                                                                                          Other
      Matters
                                                                                          
                                                                                          20Item 6
                                                                                          Exhibits
                                                                                          
                                                                                          20Signatures
                                                                                          
                                                                                          
                                                                                          22


2


Cautionary
Note Regarding Forward-Looking Statements





Throughout
this Quarterly Report on Form 10-Q or in other reports or registration
statements filed from time to time with the Securities and Exchange Commission
under the Securities Exchange Act of 1934, or under the Securities Act of 1933,
as well as in documents we incorporate by reference or in press releases or oral
statements made by our officers or representative, we may make statements that
express our opinions, expectations or projections regarding future events or
future results, in contrast with statements that reflect historical facts. These
predictive statements, which we generally precede or accompany by such typical
conditional words such as “anticipate,” “intend,” “believe,” “estimate,” “plan,”
“seek,” “project,” “potential,” or “expect,” or by the words “may,” “will,”
“could,” or “should,” and similar expressions or terminology are intended to
operate as “forward-looking statements” of the kind permitted by the Private
Securities Litigation Reform Act of 1995. That legislation protects such
predictive statements by creating a “safe harbor” from liability in the event
that a particular prediction does not turn out as anticipated.





Forward-looking
statements convey our current expectations or forecast future events. While we
always intend to express our best judgment when we make statements about what we
believe will occur in the future, and although we base these statements on
assumptions that we believe to be reasonable when made, these forward-looking
statements are not a guarantee of performance, and you should not place undue
reliance on such statements. Forward-looking statements are subject to many
uncertainties and other variable circumstances, many of which are outside of our
control, that could cause our actual results and experience to differ materially
from those we thought would occur.





We also
refer you to and believe that you should carefully read the “Cautionary Note
Regarding Forward-Looking Statements” and “Risk Factors” portions of our Annual
Report for fiscal 2009 on Form 10-K, as well as in other reports which we file
with the Securities and Exchange Commission, to better understand the risks and
uncertainties that are inherent in our business and in owning our
securities.  These reports are available publicly on the SEC
website,  www.sec.gov and on our
website,  www.symmetrymedical.com.





Any
forward-looking statements which we make in this report or in any of the
documents that are incorporated by reference herein speak only as of the date of
such statement, and we undertake no ongoing obligation to update such
statements. Comparisons of results between current and any prior periods are not
intended to express any future trends or indications of future performance,
unless expressed as such, and should only be viewed as historical
data.


3


PART
I FINANCIAL INFORMATION


ITEM
I. FINANCIAL STATEMENTS





SYMMETRY
MEDICAL INC.





CONDENSED
CONSOLIDATED BALANCE SHEETS


(In
Thousands)





July
      3,
                  
                  
                  January
      2,2010
                  
                  
                  2010(unaudited)ASSETS:Current
      Assets:Cash
      and cash equivalents
                  
                  $
                  9,771
                  
                  
                  $
                  14,219Accounts
      receivable, net
                  
                  
                  45,519
                  
                  
                  
                  38,221Inventories
                  
                  
                  66,766
                  
                  
                  
                  62,301Refundable
      income taxes
                  
                  
                  3,799
                  
                  
                  
                  3,048Deferred
      income taxes
                  
                  
                  5,350
                  
                  
                  
                  5,816Other
      current assets
                  
                  
                  4,360
                  
                  
                  
                  3,648Total
      current assets
                  
                  
                  135,565
                  
                  
                  
                  127,253Property
      and equipment, net
                  
                  
                  107,760
                  
                  
                  
                  113,369Goodwill
                  
                  
                  152,809
                  
                  
                  
                  153,813Intangible
      assets, net of accumulated amortization
                  
                  
                  40,973
                  
                  
                  
                  42,729Other
      assets
                  
                  
                  1,165
                  
                  
                  
                  1,181Total
      Assets
                  
                  $
                  438,272
                  
                  
                  $
                  438,345LIABILITIES
      AND SHAREHOLDERS' EQUITY:Current
      Liabilities:Accounts
      payable
                  
                  $
                  24,924
                  
                  
                  $
                  19,494Accrued
      wages and benefits
                  
                  
                  9,797
                  
                  
                  
                  7,607Other
      accrued expenses
                  
                  
                  3,827
                  
                  
                  
                  5,113Accrued
      income taxes
                  
                  
                  192
                  
                  
                  
                  257Deferred
      income taxes
                  
                  
                  -
                  
                  
                  
                  78Revolving
      line of credit
                  
                  
                  1,925
                  
                  
                  
                  3,320Current
      portion of capital lease obligations
                  
                  
                  457
                  
                  
                  
                  529Current
      portion of long-term debt
                  
                  
                  84,705
                  
                  
                  
                  20,400Total
      current liabilities
                  
                  
                  125,827
                  
                  
                  
                  56,798Accrued
      income taxes
                  
                  
                  6,476
                  
                  
                  
                  6,362Deferred
      income taxes
                  
                  
                  17,141
                  
                  
                  
                  17,646Derivative
      valuation liability
                  
                  
                  2,305
                  
                  
                  
                  2,982Capital
      lease obligations, less current portion
                  
                  
                  2,644
                  
                  
                  
                  2,887Long-term
      debt, less current portion
                  
                  
                  1,026
                  
                  
                  
                  69,200Total
      Liabilities
                  
                  
                  155,419
                  
                  
                  
                  155,875Shareholders'
      Equity:Common
      Stock, $.0001 par value; 75,000 shares authorized; shares issued July 3,
      2010—35,944; January 2, 2010—35,840
                  
                  
                  4
                  
                  
                  
                  4Additional
      paid-in capital
                  
                  
                  278,526
                  
                  
                  
                  278,176Retained
      earnings
                  
                  
                  6,387
                  
                  
                  
                  277Accumulated
      other comprehensive income (loss)
                  
                  
                  (2,064
                  )
                  
                  
                  4,013Total
      Shareholders' Equity
                  
                  
                  282,853
                  
                  
                  
                  282,470Total
      Liabilities and Shareholders' Equity
                  
                  $
                  438,272
                  
                  
                  $
                  438,345





See
accompanying notes to condensed consolidated financial
statements.


4


SYMMETRY
MEDICAL INC.





CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS


(In
Thousands, Except per Share Data; Unaudited)





Three Months Ended
                
                
                Six Months EndedJuly 3,
                
                
                July 4,
                
                
                July 3,
                
                
                July 4,2010
                
                
                2009
                
                
                2010
                
                
                2009Revenue
                
                $
                88,824
                
                
                $
                100,954
                
                
                $
                173,318
                
                
                $
                202,376Cost
      of Revenue
                
                
                68,461
                
                
                
                74,183
                
                
                
                135,919
                
                
                
                151,047Gross
      Profit
                
                
                20,363
                
                
                
                26,771
                
                
                
                37,399
                
                
                
                51,329Selling,
      general and administrative expenses
                
                
                12,272
                
                
                
                13,176
                
                
                
                24,876
                
                
                
                26,420Facility
      closure and severance costs
                
                
                340
                
                
                
                54
                
                
                
                860
                
                
                
                162Operating
      Income
                
                
                7,751
                
                
                
                13,541
                
                
                
                11,663
                
                
                
                24,747Other
      (income)/expense:Interest
      expense
                
                
                1,498
                
                
                
                1,564
                
                
                
                3,061
                
                
                
                3,384Derivatives
      valuation gain
                
                
                (480
                )
                
                
                (175
                )
                
                
                (788
                )
                
                
                (568
                )Other
                
                
                (100
                )
                
                
                (12
                )
                
                
                81
                
                
                
                (308
                )Income
      before income taxes
                
                
                6,833
                
                
                
                12,164
                
                
                
                9,309
                
                
                
                22,239Income
      tax expense
                
                
                2,354
                
                
                
                3,189
                
                
                
                3,199
                
                
                
                6,417Net
      income
                
                $
                4,479
                
                
                $
                8,975
                
                
                $
                6,110
                
                
                $
                15,822Net
      income per share:Basic
                
                $
                0.13
                
                
                $
                0.25
                
                
                $
                0.17
                
                
                $
                0.45Diluted
                
                $
                0.13
                
                
                $
                0.25
                
                
                $
                0.17
                
                
                $
                0.44Weighted
      average common shares and equivalent shares outstanding:Basic
                
                
                35,448
                
                
                
                35,326
                
                
                
                35,445
                
                
                
                35,289Diluted
                
                
                35,807
                
                
                
                35,529
                
                
                
                35,768
                
                
                
                35,437





See
accompanying notes to condensed consolidated financial
statements.


5


SYMMETRY
MEDICAL INC.





CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOW


(In
Thousands; Unaudited)





Six Months EndedJuly 3,
                    
                    
                    July 4,2010
                    
                    
                    2009Operating
      activitiesNet
      income
                    
                    $
                    6,110
                    
                    
                    $
                    15,822Adjustments
      to reconcile net income to net cash provided by operating
      activities:Depreciation
                    
                    
                    9,028
                    
                    
                    
                    9,443Amortization
                    
                    
                    1,464
                    
                    
                    
                    1,461Net
      loss on sale of assets
                    
                    
                    95
                    
                    
                    
                    106Deferred
      income tax provision
                    
                    
                    15
                    
                    
                    
                    4,041Stock-based
      compensation
                    
                    
                    233
                    
                    
                    
                    1,720Derivative
      valuation gain
                    
                    
                    (788
                    )
                    
                    
                    (568
                    )Foreign
      currency transaction (gain) loss
                    
                    
                    65
                    
                    
                    
                    (353
                    )Change
      in operating assets and liabilities:Accounts
      receivable
                    
                    
                    (8,411
                    )
                    
                    
                    1,956Other
      assets
                    
                    
                    (904
                    )
                    
                    
                    (1,404
                    )Inventories
                    
                    
                    (5,443
                    )
                    
                    
                    (5,896
                    )Current
      income taxes
                    
                    
                    (786
                    )
                    
                    
                    5,788Accounts
      payable
                    
                    
                    6,884
                    
                    
                    
                    (4,267
                    )Accrued
      expenses and other
                    
                    
                    519
                    
                    
                    
                    (4,295
                    )Net
      cash provided by operating activities
                    
                    
                    8,081
                    
                    
                    
                    23,554Investing
      activitiesPurchases
      of property and equipment
                    
                    
                    (6,258
                    )
                    
                    
                    (9,171
                    )Proceeds
      from the sale of property and equipment
                    
                    
                    595
                    
                    
                    
                    11Net
      cash used in investing activities
                    
                    
                    (5,663
                    )
                    
                    
                    (9,160
                    )Financing
      activitiesProceeds
      from bank revolver
                    
                    
                    16,726
                    
                    
                    
                    28,659Payments
      on bank revolver
                    
                    
                    (14,259
                    )
                    
                    
                    (26,462
                    )Issuance
      of long-term debt
                    
                    
                    2,711
                    
                    
                    
                    -Payments
      on long-term debt and capital lease obligations
                    
                    
                    (10,808
                    )
                    
                    
                    (9,120
                    )Proceeds
      from the issuance of common stock
                    
                    
                    99
                    
                    
                    
                    106Net
      cash used in financing activities
                    
                    
                    (5,531
                    )
                    
                    
                    (6,817
                    )Effect
      of exchange rate changes on cash
                    
                    
                    (1,335
                    )
                    
                    
                    748Net
      increase (decrease) in cash and cash equivalents
                    
                    
                    (4,448
                    )
                    
                    
                    8,325Cash
      and cash equivalents at beginning of period
                    
                    
                    14,219
                    
                    
                    
                    10,191Cash
      and cash equivalents at end of period
                    
                    $
                    9,771
                    
                    
                    $
                    18,516Supplemental
      disclosures:Cash
      paid for interest
                    
                    $
                    2,703
                    
                    
                    $
                    3,954Cash
      paid (received) for income taxes
                    
                    $
                    3,165
                    
                    
                    $
                    (3,474
                    )





See
accompanying notes to condensed consolidated financial
statements.


6


SYMMETRY
MEDICAL INC.


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


(In
Thousands, Except Per Share Data; Unaudited)





1.
Basis of Presentation





The
condensed consolidated financial statements include the accounts of Symmetry
Medical Inc. and its wholly-owned subsidiaries (collectively referred to as
the Corporation):  Symmetry Medical USA Inc., Jet
Engineering, Inc., Ultrexx, Inc., Symmetry Medical Switzerland SA
(formerly known as Riley Medical Europe, SA), Symmetry Medical Everest LLC,
Symmetry Medical Ireland Limited (formerly known as Everest Metal International
Limited), Symmetry Medical Cheltenham Limited, Symmetry Medical PolyVac, SAS,
Symmetry Medical Sheffield Limited (formerly known as Thornton Precision
Components Limited), Symmetry Medical Malaysia SDN, Clamonta Limited, Specialty
Surgical Instrumentation Inc. and Symmetry Medical New Bedford Inc.  The
Corporation is a global supplier of integrated products consisting primarily of
surgical implants, instruments and cases to orthopedic and other medical device
companies.





The
condensed consolidated financial statements of the Corporation have been
prepared without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and footnote disclosures
normally included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant to such
rules and regulations. In the opinion of management, the accompanying
condensed consolidated financial statements contain all adjustments of a normal
recurring nature considered necessary to present fairly the consolidated
financial position of the Corporation, its results of operations and cash flows.
The Corporation’s results are subject to seasonal fluctuations. Interim results
are not necessarily indicative of results for a full year. The condensed
consolidated financial statements included herein should be read in conjunction
with the fiscal year 2009 consolidated financial statements and the notes
thereto included in the Corporation’s Annual Report on Form 10-K for fiscal
year 2009.





The
Corporation’s fiscal year is the 52 or 53 week period ending on the Saturday
closest to December 31. Fiscal year 2010 is a 52 week year ending January
1, 2011.  The Corporation’s interim quarters for 2010 are 13 weeks
long and quarter-end dates have been set as April 3, 2010, July 3, 2010 and
October 2, 2010. Fiscal year 2009 was a 52 week year (ending January 2, 2010).
The Corporation’s interim quarters for 2009 were 13 weeks long, ending April 4,
2009, July 4, 2009 and October 3, 2009. References in these condensed
consolidated financial statements to the three months ended refer to these
financial periods, respectively.  The Corporation has evaluated
subsequent events up through the time of filing with the SEC for the quarter
ended July 3, 2010.





2.
Inventories





Inventories
consist of the following:





July 3,
                        
                        
                        January 2,2010
                        
                        
                        2010(unaudited)Raw
      material and supplies
                        
                        $
                        15,511
                        
                        
                        $
                        15,099Work-in-process
                        
                        
                        29,940
                        
                        
                        
                        27,120Finished
      goods
                        
                        
                        21,315
                        
                        
                        
                        20,082$
                        66,766
                        
                        
                        $
                        62,301





3.
Property and Equipment





Property
and equipment, including depreciable lives, consists of the
following:




July 3,
                                  
                                  
                                  January 2,2010
                                  
                                  
                                  2010(unaudited)Land
                                  
                                  $
                                  6,646
                                  
                                  
                                  $
                                  6,965Buildings and improvements (20 to
      40 years)
                                  
                                  
                                  40,917
                                  
                                  
                                  
                                  42,252Machinery and equipment (5 to 15
      years)
                                  
                                  
                                  139,030
                                  
                                  
                                  
                                  138,182Office equipment (3 to 5
      years)
                                  
                                  
                                  13,594
                                  
                                  
                                  
                                  13,194Construction-in-progress
                                  
                                  
                                  5,100
                                  
                                  
                                  
                                  3,750205,287
                                  
                                  
                                  
                                  204,343Less accumulated
      depreciation
                                  
                                  
                                  (97,527
                                  )
                                  
                                  
                                  (90,974
                                  )$
                                  107,760
                                  
                                  
                                  $
                                  113,369




7


4.
Intangible Assets
 
 Intangible
assets were acquired in connection with our business acquisitions. As of July 3,
2010, the balances of intangible assets, other than goodwill, were as
follows:


Weighted-Average
                
                Gross
                
                
                
                
                
                NetAmortization
                
                Intangible
                
                
                Accumulated
                
                
                IntangiblePeriod
                
                Assets
                
                
                Amortization
                
                
                Assets(unaudited)
                
                (unaudited)
                
                
                (unaudited)
                
                
                (unaudited)Acquired
      technology and patents
                10
      years
                
                $
                2,316
                
                
                $
                (1,139
                )
                
                $
                1,177Acquired
      customers
                18
      years
                
                
                42,452
                
                
                
                (10,394
                )
                
                
                32,058Non-compete
      agreements
                5
      years
                
                
                582
                
                
                
                (373
                )
                
                
                209Intangible
      assets subject to amortization
                17
      years
                
                
                45,350
                
                
                
                (11,906
                )
                
                
                33,444Proprietary
      processes
                Indefinite
                
                
                
                
                
                
                
                
                
                
                3,497Trademarks
                Indefinite
                
                
                
                
                
                
                
                
                
                
                4,032Indefinite-lived
      intangible assets, other than goodwill
                
                
                
                
                
                
                
                
                
                
                
                7,529Total
                
                
                
                
                
                
                
                
                
                
                $
                40,973





As of
January 2, 2010, the balances of intangible assets, other than goodwill, were as
follows:





Weighted-Average
                
                Gross
                
                
                
                
                
                NetAmortization
                
                Intangible
                
                
                Accumulated
                
                
                IntangiblePeriod
                
                Assets
                
                
                Amortization
                
                
                AssetsAcquired
      technology and patents
                10
      years
                
                $
                2,343
                
                
                $
                (1,020
                )
                
                $
                1,323Acquired
      customers
                18
      years
                
                
                42,613
                
                
                
                (9,166
                )
                
                
                33,447Non-compete
      agreements
                5
      years
                
                
                691
                
                
                
                (420
                )
                
                
                271Intangible
      assets subject to amortization
                17
      years
                
                
                45,647
                
                
                
                (10,606
                )
                
                
                35,041Proprietary
      processes
                Indefinite
                
                
                
                
                
                
                
                
                
                
                3,586Trademarks
                Indefinite
                
                
                
                
                
                
                
                
                
                
                4,102Indefinite-lived
      intangible assets, other than goodwill
                
                
                
                
                
                
                
                
                
                
                
                7,688Total
                
                
                
                
                
                
                
                
                
                
                $
                42,729





5.
Debt Arrangements




The Corporation’s Senior
Credit Agreement, including the revolving credit facility, which has a balance
of$83,337 at July 3, 2010, matures
in June 2011.  As such, all debt under this agreement has been
classified as current on the condensed consolidated balance
sheets.





The
Senior Credit Agreement contains various financial covenants, including
covenants requiring a maximum total debt to EBITDA ratio, minimum EBITDA to
interest ratio and a minimum EBITDA to fixed charges ratio. The Senior Credit
Agreement also contains covenants restricting certain corporate actions,
including asset dispositions, acquisitions, paying dividends and certain other
restricted payments, changes of control, incurring indebtedness, incurring
liens, making loans and investments and transactions with affiliates. The senior
credit facility is secured by substantially all of the Corporation's assets. The
Corporation's Senior Credit Agreement also contains customary events of
default.





On August 4, 2010, the
Corporation entered into a limited waiver (the “Limited Waiver”) to its Senior
Credit Agreement, dated as of June 13, 2006, by and among the Corporation, Wells
Fargo Bank, National Association (as successor by merger to Wachovia Bank,
National Association), as administrative agent (the “Agent”), and various other
lenders that are party thereto. Subject to certain conditions, the Limited
Waiver provides a waiver of compliance with certain covenants, and related
events of default, set forth in the Credit Facility for the second and third
fiscal quarters of 2010. Specifically, the Limited Waiver waives those certain
events of default that have occurred or are anticipated to occur under the
Credit Facility as a result of or relating to:





(1) Failure
of the Corporation to meet the minimum EBITDA to fixed charges ratio for the
second and third fiscal quarter of 2010, but only to the extent that the
Corporation maintains a ratio of at least 0.90 to 1.0 for the second fiscal
quarter of 2010 and a ratio of at least 1.0 to 1.0 for the third fiscal quarter
of 2010; and


(2)  The Corporation
exceeding the maximum amount of investments permitted to be made in foreign
subsidiaries for each of the second and third fiscal quarters of 2010, but only
to the extent that the aggregate amount of investments in the Corporation’s
foreign subsidiaries, as of the end of each of the second and third fiscal
quarters of 2010, does not exceed $15 million.


8


The Corporation was in
compliance with all covenants under the Senior Credit Agreement as of July 3,
2010.





In March,
2010, our Sheffield, UK unit obtained a new £3,000 facility, comprised of a
24-month asset-based term note and short-term revolver facility.  The
term note matures in March 2012 with monthly payments plus interest at 2.75% per
year.  The short-term revolver is due on demand and accrues interest
at 3.50% per year.  As of July 3, 2010, $2,395 was outstanding on the
term loan and there were no borrowings on the short-term
revolver.  The term note and revolver are secured by certain assets of
our Sheffield, UK unit, which had a net book value of approximately $6,284 as of
July 3, 2010.





6.
New Accounting Pronouncements





Disclosures
aboutFair
Value Measurements.In January 2010, the
Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update
(“ASU”) 2010-06, “Improving Disclosures about Fair Value
Measurements.”  ASU 2010-06 requires additional disclosures about fair
value measurements including transfers in and out of Levels 1 and 2 and a higher
level of disaggregation for the different types of financial instruments. For
the reconciliation of Level 3 fair value measurements, information about
purchases, sales, issuances and settlements are presented separately. This
standard is effective for interim and annual reporting periods beginning after
December 15, 2009 with the exception of revised Level 3 disclosure requirements
which are effective for interim and annual reporting periods beginning after
December 15, 2010. Comparative disclosures are not required in the year of
adoption. The Corporation adopted the provisions of the standard on January 3,
2010, which did not have an impact on the Corporation’s financial position,
results of operations or cash flows.





7.
Segment Reporting





The
Corporation primarily designs, develops and manufactures implants and related
surgical instruments and cases for orthopedic device companies and companies in
other medical device markets such as dental, osteobiologic and endoscopy. The
Corporation also sells products to the aerospace industry. The Corporation
manages its business in multiple operating segments. Because of the similar
economic characteristics of these operations, including the nature of the
products, comparable level of FDA regulations, and same or similar customers,
those operations have been aggregated for segment reporting purposes. The
results of one segment which sells exclusively to aerospace customers has not
been disclosed separately as it does not meet the quantitative disclosure
requirements.





The
Corporation is a multi-national Corporation with operations in the United
States, United Kingdom, France, Ireland and Malaysia. As a result, the
Corporation's financial results can be impacted by currency exchange rates in
the foreign markets in which the Corporation sells its products. Revenues are
attributed to geographic locations based on the location to which we ship our
products.





Revenue
to External Customers:





ThreeMonthsEnded
                    
                    
                    SixMonthsEndedJuly 3,
                    
                    
                    July 4,
                    
                    
                    July 3,
                    
                    
                    July 4,2010
                    
                    
                    2009
                    
                    
                    2010
                    
                    
                    2009(unaudited)
                    
                    
                    (unaudited)United
      States
                    
                    $
                    66,218
                    
                    
                    $
                    74,427
                    
                    
                    $
                    126,928
                    
                    
                    $
                    151,320Ireland
                    
                    
                    8,418
                    
                    
                    
                    9,796
                    
                    
                    
                    16,513
                    
                    
                    
                    19,298United
      Kingdom
                    
                    
                    6,563
                    
                    
                    
                    7,386
                    
                    
                    
                    13,743
                    
                    
                    
                    15,360Other
      foreign countries
                    
                    
                    7,625
                    
                    
                    
                    9,345
                    
                    
                    
                    16,134
                    
                    
                    
                    16,398Total
      net revenues
                    
                    $
                    88,824
                    
                    
                    $
                    100,954
                    
                    
                    $
                    173,318
                    
                    
                    $
                    202,376





Concentration
of Credit Risk:





A substantial portion of the
Corporation’s revenue is derived from a limited number of customers. Revenue
from customers of the Corporation which individually account for 10% or more of
the Corporation’s revenue is as follows:





Three
months ended July 3, 2010 – Two customers represented approximately 31.0% and
11.9% of revenue, respectively.





Six
months ended July 3, 2010 – Two customers represented approximately 32.6% and
11.3% of revenue, respectively.





Three
months ended July 4, 2009 – One customer represented approximately 41.4% of
revenue.


9


Six
months ended July 4, 2009 – One customer represented approximately 41.7% of
revenue.





Revenue
by Product Category:





Following
is a summary of the composition by product category of the Corporation’s revenue
to external customers. Revenues from aerospace products are included in the
“other” category.





Three Months Ended
                    
                    
                    Six Months EndedJuly 3,
                    
                    
                    July 4,
                    
                    
                    July 3,
                    
                    
                    July 4,2010
                    
                    
                    2009
                    
                    
                    2010
                    
                    
                    2009(unaudited)
                    
                    
                    (unaudited)Instruments
                    
                    $
                    35,444
                    
                    
                    $
                    46,847
                    
                    
                    $
                    67,069
                    
                    
                    $
                    93,352Implants
                    
                    
                    28,514
                    
                    
                    
                    29,935
                    
                    
                    
                    56,726
                    
                    
                    
                    59,018Cases
                    
                    
                    19,814
                    
                    
                    
                    18,873
                    
                    
                    
                    38,632
                    
                    
                    
                    37,372Other
                    
                    
                    5,052
                    
                    
                    
                    5,299
                    
                    
                    
                    10,891
                    
                    
                    
                    12,634Total
      net revenues
                    
                    $
                    88,824
                    
                    
                    $
                    100,954
                    
                    
                    $
                    173,318
                    
                    
                    $
                    202,376





8.
Net Income Per Share





The
following table sets forth the computation of earnings per share.





ThreeMonthsEnded
                
                
                SixMonthsEndedJuly 3,
                
                
                July 4,
                
                
                July 3,
                
                
                July 4,2010
                
                
                2009
                
                
                2010
                
                
                2009(unaudited)
                
                
                (unaudited)Earnings
      per share - Basic:Net
      income
                
                $
                4,479
                
                
                $
                8,975
                
                
                $
                6,110
                
                
                $
                15,822Less:  Undistributed
      earnings allocated to nonvested stock
                
                
                (41
                )
                
                
                (117
                )
                
                
                (57
                )
                
                
                (208
                )Income
      available to common shares - Basic
                
                
                4,438
                
                
                
                8,858
                
                
                
                6,053
                
                
                
                15,614Weighted-average
      common shares outstanding - Basic
                
                
                35,448
                
                
                
                35,326
                
                
                
                35,445
                
                
                
                35,289Earnings
      per share - Basic
                
                $
                0.13
                
                
                $
                0.25
                
                
                $
                0.17
                
                
                $
                0.44Earnings
      per share - Diluted:Net
      income
                
                $
                4,479
                
                
                $
                8,975
                
                
                $
                6,110
                
                
                $
                15,822Less:  Undistributed
      earnings allocated to nonvested stock
                
                
                -
                
                
                
                (66
                )
                
                
                (2
                )
                
                
                (142
                )Income
      available to common shares - Diluted
                
                
                4,479
                
                
                
                8,909
                
                
                
                6,108
                
                
                
                15,680Weighted-average
      common shares outstanding - Basic
                
                
                35,448
                
                
                
                35,326
                
                
                
                35,445
                
                
                
                35,289Effect
      of dilution
                
                
                359
                
                
                
                203
                
                
                
                323
                
                
                
                148Weighted-average
      common shares outstanding - Diluted
                
                
                35,807
                
                
                
                35,529
                
                
                
                35,768
                
                
                
                35,437Earnings
      per share - Diluted
                
                $
                0.13
                
                
                $
                0.25
                
                
                $
                0.17
                
                
                $
                0.44





The
diluted weighted average share calculations for the three and six month periods
ended July 3, 2010 do not include performance based restricted stock awarded
March 24, 2010, totaling 324,550 shares because the measurement period is not
complete.   Restricted stock awarded July 1, 2009, totaling
119,925 shares was not included in the diluted weighted average share
calculations for the three and six month periods ended July 4, 2009 because the
measurement period was not complete.





9.
Commitments and Contingencies





Legal & Environmental
Matters.The Corporation is involved, from time to time, in
various contractual, product liability, patent (or intellectual property) and
other claims and disputes incidental to its business. Currently, there is no
environmental or other litigation pending or, to the knowledge of the
Corporation, threatened, that the Corporation expects to have a material adverse
effect on its financial condition, results of operations or liquidity. While
litigation is subject to uncertainties and the outcome of litigated matters is
not predictable with assurance, the Corporation currently believes that the
disposition of all pending or, to the knowledge of the Corporation, threatened
claims and disputes, individually or in the aggregate, should not have a
material adverse effect on the Corporation’s consolidated financial condition,
results of operations or liquidity.


10


Following
the discovery of certain accounting irregularities at our Sheffield, UK
operating unit (as further described in this Form 10-Q at Part II, Item 1), the
Audit Committee self-reported the matter to the staff of the Securities and
Exchange Commission (SEC) in October 2007. Thereafter, the SEC commenced an
informal inquiry into this matter. The Corporation has fully cooperated with the
SEC in its investigation. At this time, the Corporation is unable to predict the
timing of the ultimate resolution of this investigation or the impact
thereof.





Unconditional Purchase
Obligations.The Corporation has contracts to purchase minimum
quantities of plastic, cobalt chrome and titanium through December
2012.  Based on contractual pricing at July 3, 2010, remaining minimum
purchase obligations total $21,119.  Purchases under plastic, cobalt
chrome and titanium contracts total approximately $11,041 for the six month
period ended July 3, 2010.  These purchases are not in excess of our
forecasted requirements.





10.
Comprehensive Income





Comprehensive
income is comprised of net income, gains (losses) resulting from currency
translations of foreign entities and unrealized gain and losses on our
derivative designated as a hedge under ASC 815, Hedging(formerly SFAS 133).
Comprehensive income consists of the following:





ThreeMonthsEnded
                  
                  
                  SixMonthsEndedJuly 3,
                  
                  
                  July 4,
                  
                  
                  July 3,
                  
                  
                  July 4,2010
                  
                  
                  2009
                  
                  
                  2010
                  
                  
                  2009(unaudited)
                  
                  
                  (unaudited)Net
      Income
                  
                  $
                  4,479
                  
                  
                  $
                  8,975
                  
                  
                  $
                  6,110
                  
                  
                  $
                  15,822Foreign
      currency translation adjustments
                  
                  
                  (1,765
                  )
                  
                  
                  5,408
                  
                  
                  
                  (6,013
                  )
                  
                  
                  5,018Derivative,
      net of tax benefit (1)
                  
                  
                  28
                  
                  
                  
                  (58
                  )
                  
                  
                  (64
                  )
                  
                  
                  (100
                  )Comprehensive
      income
                  
                  $
                  2,742
                  
                  
                  $
                  14,325
                  
                  
                  $
                  33
                  
                  
                  $
                  20,740





(1)
            Derivative
      gains (losses) are reported net of income tax (expense)/benefit of
      $(18) and $38 for the three month periods ended July 3, 2010 and July 4,
      2009, respectively, and $44 and $67 for the six month periods ended July
      3, 2010 and July 4, 2009,
respectively.





11.
Derivatives





The Corporation
utilizes derivative instruments to minimize the volatility of cash flows and
income statement impacts associated with interest rate payments on its variable
rate debt.  The Corporation recognizes all derivative instruments as
either assets or liabilities at fair value on the consolidated balance sheets.
The Corporation utilizes third party valuations to assist in the determination
of the fair value of these derivatives. The Corporation considers its derivative
instrument valuations to be Level 2 fair value measurements under the provision
of the FASB Statement on fair value measurements (See Note 12).





To the
extent a derivative instrument is designated effective as a cash flow hedge of
an exposure to changes in the fair value of a future transaction, the change in
fair value of the derivative is deferred in accumulated other comprehensive
income / (loss), a component of shareholders’ equity in the condensed
consolidated balance sheets, until the underlying transaction hedged is
recognized in the unaudited condensed consolidated statements of operations. The
Corporation accounts for certain derivatives hedging the payment of interest as
cash flow hedges and the impact of the hedge is reclassified to interest expense
in the unaudited condensed consolidated statements of operations upon payment of
interest.





The
Corporation’s profitability and cash flows are affected by changes in interest
rates, specifically the LIBOR rate.  The primary purpose of the
Corporation’s interest rate risk management activities is to hedge its exposure
to changes in interest rates.  In 2009, the Corporation entered into a
forward swap contract to manage interest rate risk related to a portion of its
current variable rate senior secured term loan. The Corporation has hedged the
future interest payments related to $64,100 of the total outstanding term loan
indebtedness due in 2011 pursuant to this forward swap contract.  This
swap contract, which had a fair value of ($495) at July 3, 2010,
is designated as a cash flow hedge of the future payment of variable rate
interest with three-month LIBOR fixed at 1.34% per annum in 2009, 2010 and
2011.


11




11.
Derivatives (Continued)
  In 2006,
the Corporation entered into a forward swap contract to manage interest rate
risk related to $40,000 of its then existing variable rate senior secured first
lien term loan to a fixed payment obligation of 5.45% per annum for the period
commencing July 3, 2006 and ending on June 10, 2011. This swap contract, which
had a fair value of ($1,810) at July 3, 2010, was not designated as a cash flow
hedge of the future variable rate payment of interest.  The entire
change in the fair value of this interest rate swap is recorded to derivative
valuation (gain) / loss in the unaudited condensed consolidated statements of
operations. For the three months ended July 3, 2010 and July 4, 2009, the
Corporation recorded gains of $480 and $175, respectively, and gains of $788 and
$568 for the six months then ended.





12.
Fair Value of Financial Instruments





As of
July 3, 2010 and January 2, 2010, the Corporation held certain assets that are
required to be measured at fair value on a recurring basis. These included the
Corporation’s interest rate derivative instruments.  The Corporation’s
derivative instruments consist of contracts that are not traded on a public
exchange. The fair values of interest rate derivative instruments are determined
based on inputs that are readily available in public markets or can be derived
from information available in publicly quoted markets. Therefore, the
Corporation has categorized these swap contracts as Level 2 in accordance with
the FASB Statement on fair value measurement.





The
following table summarizes certain fair value information at July 3, 2010 and
January 2, 2010 for assets and liabilities measured at fair value on a recurring
basis.





July 3, 2010
                                                    
                                                    January 2, 2010Fair Value
Measurements
                                                    
                                                    Fair Value
MeasurementsLevel 1
                                                    
                                                    
                                                    Level 2
                                                    
                                                    
                                                    Level 3
                                                    
                                                    Total
                                                    
                                                    Level 1
                                                    
                                                    Level 2
                                                    
                                                    Level 3
                                                    
                                                    TotalLiabilitiesInterest
      rate swaps
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    $
                                                    (2,305
                                                    )
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    $
                                                    (2,305
                                                    )
                                                    
                                                    $
                                                    -
                                                    
                                                    
                                                    $
                                                    (2,982
                                                    )
                                                    
                                                    $
                                                    -
                                                    
                                                    
                                                    $
                                                    (2,982
                                                    )$
                                                    -
                                                    
                                                    
                                                    $
                                                    (2,305
                                                    )
                                                    
                                                    $
                                                    -
                                                    
                                                    
                                                    $
                                                    (2,305
                                                    )
                                                    
                                                    $
                                                    -
                                                    
                                                    
                                                    $
                                                    (2,982
                                                    )
                                                    
                                                    $
                                                    -
                                                    
                                                    
                                                    $
                                                    (2,982
                                                    )





Additionally,
financial instruments also consist of cash and cash equivalents, accounts
receivable, and long-term debt.  The carrying value of these financial
instruments approximates fair value.





13.    Facility
Closure and Severance Costs





Results
of Operations include pre-tax charges of $340 and $54 for the three months ended
July 3, 2010 and July 4, 2009, respectively, and $860 and $162 for the six
months then ended, associated with employee cost reduction and efficiency
actions and the consolidation of our Auburn, ME facility into other facilities
that produce similar products.  For the three month period ended July
3, 2010, these costs are comprised of $258 of severance costs and an additional
$82 of moving expenses compared to $54 of severance costs for the period ended
July 4, 2009.  For the six month period ended July 3, 2010, these
costs are comprised of $591 of severance costs and an additional $269 of moving
expenses compared to $162 of severance costs for the period ended July 4,
2009.





As of
July 3, 2010 and January 2, 2010, severance accruals related to these cost
reduction and efficiency actions totaled $91 and $836, respectively, and are
included in accrued and other liabilities in the condensed consolidated balance
sheets.  The reduction in the accrual from January 2, 2010 represents
payments made during the first half of 2010 of $1,336, offset by additional
severance costs incurred of $591.


12


ITEM 2.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS





(In
millions)





Business
Overview





We are a
leading independent provider of implants and related instruments and cases to
orthopedic device manufacturers and other medical markets. We also design,
develop and produce these products for companies in other segments of the
medical device market, including arthroscopy, dental, laparoscopy, osteobiologic
and endoscopy sectors, and provide limited specialized products to
non-healthcare markets, such as the aerospace industry.





We offer
our customers Total Solutions® for complete implant systems—implants,
instruments and cases. While our revenue to date has been derived primarily from
the sale of implants, instruments and cases separately, or instruments and cases
together, our ability to provide Total Solutions® for complete implant systems
has already proven to be attractive to our customers, and we expect this
capability will provide us with growth opportunities. In addition, we expect
that our Total Solutions® capability will increase the relative percentage of
value added products that we supply to our customers.





During
the second quarter 2010, our revenue decreased $12.2 million, or 12.1%, compared
to the second quarter 2009.  This reduction was primarily driven by
reduced customer demand in the instrument product line compounded by unfavorable
foreign currency exchange rate impacts of $1.1 million. The overall
economic environment continues to impact demand from our major customers, which
resulted in reduced revenue of 19.2% during the second quarter from our combined
five largest OEM customers as they continue to manage inventory levels and the
timing of their various product launches.  However, we did experience
a 5.1% increase in revenue in the second quarter 2010 as compared to the first
quarter 2010 and we believe we will continue to see sequential increases in
revenue during the third quarter 2010.





We
continue to be optimistic about the future as the larger OEMs are increasingly
focused on improving their supply chains.  This focus should result in
consolidation of suppliers who in turn will be expected to provide a wider range
of services, higher quality and reduced overall costs.  We believe
that we are well positioned to benefit from increased OEM outsourcing and
consolidation of suppliers.





Recently
we have been engaged in more active and positive discussions with our customers
to provide enhanced services.  While these changes tend to have longer
leadtime, we continue to believe that we are in a favorable position to emerge
as a supplier of choice for our major customers.  We believe our
global capacity and competitive strengths will benefit us as the order volume
and large project launches occur.





Over the
past four years, we have completed several acquisitions which expanded our
customer base and enabled us to assemble and offer a comprehensive line of
implants, surgical instruments and cases for orthopedic device manufacturers and
other medical markets on a global basis, as well as specialized parts into the
aerospace industry.





Our focus
remains on being a leader in our core orthopedic business, while capitalizing on
our leadership to extend our Total Solutions® approach into other medical
markets.  We continue to see a favorable customer response to our offerings
as more and more of our customers are impacted by increased quality and
regulatory requirements.   We are increasingly able to use the
leverage of our global resources while providing a local presence across
the global marketplace.  This allows us to be close to our customers,
provide quicker response times, and increase our value added
services.





During
the first quarter of 2010, the U.S. Congress passed and the President
signed into law the Patient Protection and Affordable Care Act, as well as the
Health Care and Education Reconciliation Act of 2010, which represent a
significant change to the current U.S. healthcare system.  A detailed
discussion of these risks and other factors is provided in Item 1A of our
Annual Report on Form 10-K for the year ended January 2, 2010, and Part II, Item
1A in this report.




13


Second
Quarter Results of Operations
 
 Revenue.   Revenue
for the three month period ended July 3, 2010 decreased $12.2 million, or 12.1%,
to $88.8 million from $101.0 million for the comparable 2009 period. 
Revenue for each of our principal product categories in these periods was as
follows:


ProductCategory
                      
                      ThreeMonthsEndedJuly 3,
                      
                      
                      July 4,2010
                      
                      
                      2009(unaudited)Instruments
                      
                      $
                      35.4
                      
                      
                      $
                      46.9Implants
                      
                      
                      28.5
                      
                      
                      
                      29.9Cases
                      
                      
                      19.8
                      
                      
                      
                      18.9Other
                      
                      
                      5.1
                      
                      
                      
                      5.3Total
                      
                      $
                      88.8
                      
                      
                      $
                      101.0





The $12.2 million decrease in
revenue was primarily driven by lower instrument revenue as ourfivelargest OEM customers reduced
spending on their launch quantities compared to strong demand in the second
quarter of 2009.We also experienced reducedrevenueas a result of
theglobaleconomic
environment, which has resulted inreduced overall
revenueof 19.2%fromour five largest OEM
customers as theymanageinventory levels and adjust
the timing of their various product launches.  The reduction in
revenue was further impacted by unfavorable foreign currency exchange rate
fluctuations of $1.1 million.





Instrument revenue decreased
$11.5million. This decrease was
driven primarily by lowerrevenuefrom ourfive largestOEM customers due to the
timing of their various product launch activity and theirmanagement ofinventorylevels, which resulted in a
decrease in revenue of $14.4 million.  Foreign currency
exchange rate fluctuations further impacted instrument revenues with an
unfavorable impact of $0.1 million.Revenue from
other customers partially offset the decrease in revenues from our five largest
OEM customers driven by expanded product offerings and additions of new
customers.





Implant revenue decreased
$1.4 million driven by ourfive largestOEM customers’management of theirinventory
levels, which
accounted for $1.6 million of the decrease in revenue, combined withunfavorable
foreign currency exchange rate fluctuations of $0.7 million.Revenue from
other customers partially offset the decline in revenues from our five largest
OEM customers.





Case revenue increased $0.9
million due to increasedrevenuefrom ourfive largestOEMcustomersof $2.3 millionas wellincreased revenuefrom our non-orthopedic
medical customers.  Case revenue was negatively impacted byreduced revenue
from other customers as well asunfavorable foreign currency
exchange rate fluctuations, which had a $0.1 million
impact.





Other product revenue
decreased $0.2milliondueto unfavorableforeign currency exchange
rate fluctuationsof$0.2
million.





Gross
Profit.  Gross profit for the three
month period ended July 3, 2010 decreased $6.4million, or 23.9%, to $20.4
million from $26.8 million for the comparable 2009 perioddue to the $12.2 million
decline in revenue combined with a decrease in gross
margin.Gross margin as a percentage
ofrevenue for
the second quarter 2010 was 22.9% compared to 26.5% in the same period last
year.  This 3.6%
reduction wasprimarily due to the12.1%decline in
revenuewhich
reduced our ability to leverage fixed overhead costs, increased subcontracting
costs and changes in product mix.The increase in
subcontracting costs related to our case product line and the consolidation of
our Auburn, ME facility.





Selling, General and Administrative
Expenses.  For the three month period ended July 3, 2010,
selling, general and administrative expenses (“SG&A”) were $12.3 million
compared with the three month period ended July 4, 2009 of $13.2 million. Thedecrease was primarily driven
by reduced employee compensation costs including non-cashrestricted stock compensation
expenserelated
to continuedcost control effortsimplemented in
the latter half of 2009to offset the lower revenue
levels.





Facility Closureand Severance
Costs.Results of Operations include pre-tax charges of $0.3
million and $0.1 million for the three months ended July 3, 2010 and July
4, 2009, respectively, associated with employee cost reduction and efficiency
actions and the consolidation of our Auburn, ME facility into other facilities
that produce similar products.  For the three month period ended July
3, 2010, these costs are comprised of $0.2 million of severance costs and an
additional $0.1 million of moving expenses compared to $0.1 million of severance
costs for the period ended July 4, 2009.  Costs charged to operations
in the second quarter of 2010 were paid during second
quarter.  Included in accrued and other liabilities in the
consolidated balance sheet as of July 3, 2010 is $0.1 million of severance costs
incurred during fiscal 2009 that have not yet been paid.  These costs
are all expected to be paid during 2010.





Other (Income)
Expense.    Interest expense for the three month
period ended July 3, 2010 decreased $0.1 million, or 4.2%, to $1.5 million
from $1.6 million for the comparable period in 2009. This decrease reflects
the reduction in aggregate outstanding indebtedness of $34.2 million, or 27.4%
as compared to July 4, 2009.  The derivative gain inthesecond quarter 2010 consists
of a gain on interest rate swap valuation of $0.5 million related to our
interestrate
swap that has not been designated as a hedge as compared to a gain of
$0.2 million for the comparable period in 2009. The interest rate swaps are
used to convert our variable rate long-term debt to fixed rates. Other income
for the three month period ended July 3, 2010 increased $0.1 million from the
comparable period in 2009 due to favorable foreigncurrencyexchange rate fluctuations on
transactions denominated in foreign currencies.


14


Provision for Income
Taxes. Our
effective tax rate was 34.5% for the three month period ended July 3, 2010 as
compared to 26.2% for the three month period ended July 4, 2009. Provision for
income taxes decreased by $0.8 million, or 26.3%, to $2.4 million for the three
month period ended July 3, 2010 from $3.2 million for the comparable 2009 period
primarily due to a $5.3 million decrease in pre-tax income.   Our
effective tax rate differed from the U.S. Federal statutory rate of 35%primarily due to
the favorable impact of foreignincome taxes. 
Additionally, we have been adversely impacted by the absence of the research
& development tax credit, which expired at the end of 2009.  Pending
legislation would retroactively reinstate the R&D tax credit to the
beginning of 2010.  This legislation, if enacted, would positively impact
the effective tax rate in the period that it is enacted.




Six
Months Results of Operations





Revenue.   Revenue
for the six month period ended July 3, 2010 decreased $29.1 million, or 14.4%,
to $173.3 million from $202.4 million for the comparable 2009 period. 
Revenue for each of our principal product categories in these periods was as
follows:




ProductCategory
                      
                      SixMonthsEndedJuly 3,
                      
                      
                      July 4,2010
                      
                      
                      2009(unaudited)Instruments
                      
                      $
                      67.1
                      
                      
                      $
                      93.4Implants
                      
                      
                      56.7
                      
                      
                      
                      59.0Cases
                      
                      
                      38.6
                      
                      
                      
                      37.4Other
                      
                      
                      10.9
                      
                      
                      
                      12.6Total
                      
                      $
                      173.3
                      
                      
                      $
                      202.4





The $29.1
million decreasein revenue was primarily
driven bythe
$26.3 million decrease ininstrument revenue as ourfivelargest OEM
customers reduced spending onproductlaunchescompared to
2009.We also experienced reducedrevenueas a result of
theglobaleconomic
environment, which has resulted in reducedoverall revenueof22.5%fromour five largest OEM
customers as theymanageinventory levels and adjust
the timing of their various product launches.  The reduction in
revenue wasslightly offsetby favorable foreign
currency exchange rate fluctuationsof $0.7million.





Instrument revenue decreased
$26.3million. This decrease was
driven by lowerrevenuefrom ourfive largestOEM customersof $32.3 milliondue to the timing of their
various product launch activity andmanagement ofinventorylevels.  Offsetting this decline in revenue was increased revenue from
our other customers driven by expanded product offerings and additions of new
customers. Foreign currency exchange rate
fluctuations
also partially offset the decline in revenue with a $0.1 million favorable
impact.





Implant revenue decreased
$2.3million driven by ourfive
largestOEM
customersmanaging theirinventory levels, which accounted for $1.7
million of the decrease in revenue. Implant revenue was positively impacted by
$0.2 million of favorable foreign currency
exchange rate fluctuation.





Case revenue increased
$1.2million due to increasedrevenuefrom ourfive largestOEMcustomersof $2.5 millionas well asincreased revenuefrom our non-orthopedic
medical customers.  Case revenues
were also positivelyimpactedbyfavorable foreign currency
exchange rate fluctuations of $0.2 million.





Other product revenue
decreased $1.7million drivenby a reduction in revenue
from our largest customer in aerospace industry reacting to deteriorating market
conditions in that sector.  Related foreign currency
exchange rate fluctuationswere favorableby $0.2 million.





Gross
Profit.  Gross profit for the six month period ended July 3,
2010 decreased $13.9 million, or 27.1%, to $37.4 million from $51.3 million for
the comparable 2009 period due to the $29.1 million decline in revenue and a
decline in gross margin. Gross margin as a percentage
ofrevenue for
thesix month
period ended July 3, 2010was 21.6% compared to 25.4% in the same period last
year.This3.8% reduction was primarily
due to the 14.4% decline in revenue which reduced our ability to leverage fixed
overhead costs, increased subcontracting costs and product mix.  The
increase in subcontracting costs related to our case produce line and the
consolidation of our Auburn, ME facility.


15








Selling, General and Administrative
Expenses.  For the six month period ended July 3, 2010,
selling, general and administrative expenses (“SG&A”) were $24.9 million
compared with the six month period ended July 4, 2009 of $26.4 million. The improvement reflectsreduced employee
compensation costs including non-cashrestricted stock compensationdriven bycost control
effortsimplemented in the latter
half of 2009to
offset lower revenue levels.





Facility Closure and Severance
Costs.Results of
Operations include pre-tax charges of $0.9 million and $0.2 million for the
six months ended July 3, 2010 and July 4, 2009, respectively associated
with employee cost reduction and efficiency actions and the consolidation of our
Auburn, ME facility into other facilities that produce similar
products.  For the six month period ended July 3, 2010, these costs
are comprised of $0.6 million of severance costs and an additional $0.3 million
of moving expenses compared to $0.2 million of severance costs for the period
ended July 4, 2009.  As of July 3, 2010 and January 2, 2010, severance
accruals related to these cost reduction and efficiency actions totaled
$0.1 and $0.8 million, respectively, and are included in accrued and other
liabilities in the condensed consolidated balance sheets.  The
reduction in the accrual from January 2, 2010 represents payments made during
the first half of 2010 of $1.3 million, offset by additional severance costs
incurred of $0.6 million.  Remaining costs are all expected to be paid
during 2010.





Other (Income)
Expense.    Interest expense for the six month period
ended July 3, 2010 decreased $0.3 million, or 9.5%, to $3.1 million from
$3.4 million for the comparable period in 2009. This decrease reflects the
reduction in aggregate outstanding indebtedness $34.2 million, or 27.4% as
compared to July 4, 2009.  The derivatives gain for the
first half of 2010 consists of a gain on interest rate swap valuation of $0.8
million related to our interest rate swap that has not been designated as a
hedge as compared to a gain of $0.6 million for the comparable period in
2009. The interest rate swaps are used to convert our variable rate long-term
debt to fixed rates. Other expense for the six month period ended July 3, 2010
increased $0.4 million from the comparable period in 2009, from a gain of $0.3
million to a loss of $0.1 million, due to unfavorable foreign currency exchange
rate fluctuations on transactions denominated in foreign
currencies.





Provision for Income
Taxes. Our effective tax rate was 34.4% for the six month period
ended July 3, 2010 as compared to 28.9% for the six month period ended July 4,
2009. Provision for income taxes decreased by $3.2 million, or 50.2%, to $3.2
million for the six month period ended July 3, 2010 from $6.4 million for the
comparable 2009 period and differed from the US Federal rate of 35% primarily
due to the favorable
impact of foreignincome taxes. 
Additionally, we have been adversely impacted by the absence of the research
& development tax credit, which expired at the end of 2009.  Pending
legislation would retroactively reinstate the R&D tax credit to the
beginning of 2010.  This legislation, if enacted, would positively impact
the effective tax rate in the period that it is enacted.





Liquidity
and Capital Resources





Current
Market Conditions





We
continue to experience challenging business conditions due to the overall
economic environment that has resulted in reduced demand from our major OEM
customers as they continue to work down inventory levels and manage the timing
of their various product launch activities.





Current
global economic conditions have resulted in increased volatility in the
financial markets. During the first half of Fiscal 2010, we actively monitored
the financial health of our supplier base, tightened requirements for customer
credit, and increased spending controls across the company. We will continue to
monitor and manage these activities depending on current and expected market
developments.





Liquidity





Our
principal sources of liquidity in the six month period ended July 3, 2010 were
cash generated from operations and borrowings under our senior revolving credit
facility.  Principal uses of cash in the six month period ended July 3,
2010 included increased working capital and capital expenditures as well as
debt service. We expect that our principal uses of cash in the future will be to
finance working capital, to pay for capital expenditures, to service debt and to
fund possible future acquisitions.





We
believe our cash resources will permit us to stay committed to our strategic
plan of increasing our share in the orthopedic market and expanding into other
medical device segments and growing the business.





Operating
Activities. Operating activities generated cash of $8.1
million in the six month period ended July 3, 2010 compared to $23.6 million for
the six month period ended July 4, 2009, a decrease of $15.5 million.  The
decrease in cash from operations for the six month period ended July 3, 2010 is
primarily a result of a $9.7 reduction in net income and increased working
capital requirements for accounts receivable and inventory driven by increases
in revenue and production requirements in the second quarter of 2010 as compared
to the fourth quarter of 2009.





Investing Activities. 
Capital expenditures of $6.3 million were $2.9 million lower in the six month
period ended July 3, 2010 compared to the six month period ended July 4,
2009.


16





Financing
Activities. Financing activities used $5.5 million of
cash in the six month period ended July 3, 2010 compared to $6.8 million for the
six month period ended July 4, 2009, due primarily to payments on long-term debt
and capital leases of $10.8 million, partially offset by cash received from a
new asset-based 24 month term note of $2.7 million at our Sheffield, UK facility
and net borrowings on our revolving line of credit of $2.5 million.





Capital
Expenditures





Capital
expenditures totaled $6.3 million for the six months ended July 3, 2010,
compared to $9.2 million for the six month period ended July 4, 2009. Capital
expenditures have been focused on areas strategically aligned to expand our
capabilities to further support our Spine customers, expand our Malaysia
operations and continue to increase efficiencies throughout our
facilities.





Debt
and Credit Facilities





As of July 3, 2010, we had an
aggregate of $90.8 million of outstanding indebtedness, which consisted of $79.4
million of term loan borrowings outstanding under our Senior Credit Agreement,
$4.0 million of borrowings outstanding under our revolving credit facility, $2.4
million of borrowings under our new UK asset-based 24-month term note, $1.9
million of borrowings under our Malaysia short-term credit facility, and $3.1
million of capital lease obligations. We had two outstanding letters of credit
as of July 3, 2010 in the amounts of $3.5 million and $0.2
million.





In March,
2010, our Sheffield, UK unit obtained a new £3.0 million facility, comprised of
a 24-month asset-based term note and short-term revolver facility. The term note
matures in March 2012 with monthly payments plus interest at 2.75% per year. The
short-term revolver is due on demand and accrues interest at 3.50% per year. As
of July 3, 2010, $2.4 million was outstanding on the term loan and there were no
borrowings on the short-term revolver. The term note and revolver are secured by
certain assets of our Sheffield, UK unit, which had a net book value of
approximately $6.3 million as of July 3, 2010.





The
Senior Credit Agreement contains various financial covenants, including
covenants requiring a maximum total debt to EBITDA ratio, minimum EBITDA to
interest ratio and a minimum EBITDA to fixed charges ratio. The Senior Credit
Agreement also contains covenants restricting certain corporate actions,
including asset dispositions, acquisitions, paying dividends and certain other
restricted payments, changes of control, incurring indebtedness, incurring
liens, making loans and investments and transactions with affiliates. The senior
credit facility is secured by substantially all of the Corporation's assets. The
Corporation's Senior Credit Agreement also contains customary events of
default.





On August 4, 2010, the
Corporation entered into a limited waiver (the “Limited Waiver”) to its Senior
Credit Agreement, dated as of June 13, 2006, by and among the Corporation, Wells
Fargo Bank, National Association (as successor by merger to Wachovia Bank,
National Association), as administrative agent (the “Agent”), and various other
lenders that are party thereto. Subject to certain conditions, the Limited
Waiver provides a waiver of compliance with certain covenants, and related
events of default, set forth in the Credit Facility for the second and third
fiscal quarters of 2010. Specifically, the Limited Waiver waives those certain
events of default that have occurred or are anticipated to occur under the
Credit Facility as a result of or relating to:





(1) Failure of the
Corporation to meet the minimum EBITDA to fixed charges ratio for the second and
third fiscal quarter of 2010, but only to the extent that the Corporation
maintains a ratio of at least 0.90 to 1.0 for the second fiscal quarter of 2010
and a ratio of at least 1.0 to 1.0 for the third fiscal quarter of 2010;
and





(2) The Corporation exceeding
the maximum amount of investments permitted to be made in foreign subsidiaries
for each of the second and third fiscal quarters of 2010, but only to the extent
that the aggregate amount of investments in the Corporation’s foreign
subsidiaries, as of the end of each of the second and third fiscal quarters of
2010, does not exceed $15 million.





The Corporation was in
compliance with all covenants under the Senior Credit Agreement as of July 3,
2010. A copy of the Limited Waiver is attached hereto as Exhibit 10.50 and
incorporated herein by reference.





The Corporation’s Senior
Credit Agreement, including the revolving credit facility, which has a balance
of $83.4 million at July 3, 2010, matures in June 2011. We have begun to explore
refinancing alternatives to pay off the remaining balance and to establish
adequate funds for future expansion.  At this time, we believe that we
will have multiple financing options and we anticipate completing a refinancing
in the second half of 2010.


17
  Contractual
Obligations and Commercial Commitments





The following table reflects
our contractual obligations as of July 3, 2010.





Payments Due By PeriodTotal
                
                
                Less than
                  1 year
                
                
                1-3 years
                
                
                4-5 years
                
                
                More than
                  5 years(In
      Millions)Long-term
      debt obligations(1)
                
                $
                85.7
                
                
                $
                84.7
                
                
                $
                1.0
                
                
                $
                -
                
                
                $
                -Capital
      lease obligations
                
                
                5.4
                
                
                
                0.5
                
                
                
                2.7
                
                
                
                1.6
                
                
                
                0.6Operating
      lease obligations
                
                
                4.0
                
                
                
                0.9
                
                
                
                2.4
                
                
                
                0.5
                
                
                
                0.2Purchase
      obligations(2)
                
                
                21.1
                
                
                
                8.1
                
                
                
                13.0
                
                
                
                -
                
                
                
                -Total
                
                $
                116.2
                
                
                $
                94.2
                
                
                $
                19.1
                
                
                $
                2.1
                
                
                $
                0.8





(1)
            Represents
      principal 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 Amendment ranges from 0.25% to 1.25% for base rate borrowings and
      1.25% to 2.25% for LIBOR borrowings, subject to adjustment based on the
      average availability under the Revolving Credit
  Facility.





(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.





This
table does not include liabilities for unrecognized tax benefits of
$6.5 million as reasonable estimates could not be made regarding the timing
of future cash outflows associated with those liabilities.





Off-Balance
Sheet Arrangements





Our
off-balance sheet arrangements include our operating leases and letters of
credit, which are available under the senior credit facility. We had two letters
of credit outstanding as of July 3, 2010 in the amounts of $3.5 million and $0.2
million.





Environmental





Our
facilities and operations are subject to extensive federal, state, local and
foreign environmental and occupational health and safety laws and regulations.
These laws and regulations govern, among other things, air emissions; wastewater
discharges; the generation, storage, handling, use and transportation of
hazardous materials; the handling and disposal of hazardous wastes; the cleanup
of contamination; and the health and safety of our employees. Under such laws
and regulations, we are required to obtain permits from governmental authorities
for some of our operations. If we violate or fail to comply with these laws,
regulations or permits, we could be fined or otherwise sanctioned by regulators.
We could also be held responsible for costs and damages arising from any
contamination at our past or present facilities or at third-party waste disposal
sites. We cannot completely eliminate the risk of contamination or injury
resulting from hazardous materials, and we may incur material liability as a
result of any contamination or injury.





We
incurred approximately $0.1 million in capital expenditures for environmental,
health and safety in the six month period ended July 3, 2010 compared to $0.3
million for the comparable 2009 period.





In
connection with past acquisitions, we completed Phase I environmental
assessments and did not identify any significant issues that need to be
remediated.  We cannot be certain that environmental issues will not be
discovered or arise in the future related to these acquisitions.





In
conjunction with the New Bedford acquisition in January 2008, we purchased $5.0
million of environmental insurance coverage for this facility. This policy
expires January 25, 2013. While the insurance may mitigate the risk of certain
environmental liabilities, we cannot guarantee that a particular liability will
be covered by this insurance.


18





Based on
information currently available, we do not believe that we have any material
environmental liabilities.





Critical
Accounting Policies and Estimates





The
preparation of our financial statements requires management to make estimates,
judgments and assumptions that affect the reported amounts of assets,
liabilities, revenues and expenses during the periods presented. Our Annual
Report on Form 10-K for fiscal year ended January 3, 2009 includes a
summary of the critical accounting policies we believe are the most important to
aid in understanding our financial results. There have been no material changes
to these critical accounting policies that impacted our reported amounts of
assets, liabilities, revenues or expenses during the three months ended July 3,
2010.





New
Accounting Pronouncements





Disclosures
aboutFair
Value Measurements.In January 2010, the
Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update
(“ASU”) 2010-06, “Improving Disclosures about Fair Value Measurements”. ASU
2010-06 requires additional disclosures about fair value measurements including
transfers in and out of Levels 1 and 2 and a higher level of disaggregation for
the different types of financial instruments. For the reconciliation of Level 3
fair value measurements, information about purchases, sales, issuances and
settlements are presented separately. This standard is effective for interim and
annual reporting periods beginning after December 15, 2009 with the exception of
revised Level 3 disclosure requirements which are effective for interim and
annual reporting periods beginning after December 15, 2010. Comparative
disclosures are not required in the year of adoption. The Corporation adopted
the provisions of the standard on January 3, 2010, which did not have an impact
on the Corporation’s financial position, results of operations or cash
flows.





ITEM 3.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK





For
financial market risks related to changes in interest rates, foreign currency
exchange rates, commodity prices and the effects of inflation, reference is made
to Item 7a “Quantitative and Qualitative Disclosures About Market
Risk” contained in Part II of our Annual Report on Form 10-K for the fiscal
year ended January 2, 2010. Our exposure to these risks, at the end of the
second quarter covered by this report, has not changed materially since January
2, 2010.





ITEM 4.
CONTROLS AND PROCEDURES





This
Report includes the certifications of our Chief Executive Officer and Chief
Financial Officer required by Rule 13a-14 of the Securities Exchange Act of 1934
(the “Exchange Act”).  See Exhibits 31.1 and 31.2.  This
Item 4 includes information concerning the controls and control evaluations
referred to in those certifications.





Evaluation
of Disclosure Controls and Procedures





Disclosure
controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the
Exchange Act) are designed to ensure that information required to be disclosed
in reports filed or submitted under the Exchange Act is recorded, processed,
summarized, and reported within the time periods specified in the SEC rules and
forms and that such information is accumulated and communicated to management,
including the Chief Executive Officer and the Chief Financial Officer, to allow
timely decisions regarding required disclosures.





In
connection with the preparation of this Report, our management, under the
supervision and with the participation of the Chief Executive Officer and Chief
Financial Officer, conducted an evaluation of the effectiveness of the design
and operation of our disclosure controls and procedures as of the end of the
fiscal quarter covered by this report on Form 10-Q.  Based on that
evaluation, our Chief Executive Officer and Chief Financial Officer have
concluded that our disclosure controls and procedures were effective as of July
3, 2010.





Changes
in Internal Control over Financial Reporting





There
have been no changes in our “internal control over financial reporting” (as
defined in Rule 13a-15(f) of the Exchange Act) that occurred during the
fiscal quarter covered by this report on Form 10-Q that has materially
affected, or is reasonably likely to materially affect, our internal control
over financial reporting.




19





PART II
OTHER INFORMATION





ITEM
1.    LEGAL PROCEEDINGS





SEC
Inquiry





Following
the discovery of the accounting irregularities at our Sheffield, UK operating
unit, the Audit Committee self-reported the matter to the staff of the SEC in
October 2007.  Thereafter, the SEC commenced an informal inquiry
regarding this matter.





We have
fully cooperated with the SEC in its investigation.  At this time we
are unable to predict the time period necessary to resolve the investigation or
the ultimate resolution thereof.  To date, considerable legal, tax and
accounting expenses have been incurred in connection with our Audit Committee’s
investigation into this matter and expenditures may continue to be incurred in
the future with regard to the SEC’s investigation.  It is also
possible that the investigation may continue to require management’s time and
attention and accounting and legal resources, which could otherwise be devoted
to the operation of our business.  Moreover, any action by the SEC
against us, or members of our management, may cause us to be subject to
injunctions, fines or other penalties or sanctions or result in private civil
actions, loss of key personnel or other adverse consequences and may require us
to devote additional time and resources to these matters.  The
investigation may adversely affect our ability to obtain, and /or increase the
cost of obtaining directors’ and officers’ liability insurance and/or other
types of insurance, which could have a material adverse affect on our business,
results of operations and financial condition.  In addition, the SEC
investigation and the remedies applied may affect certain of our business
relationships and consequently may have an adverse effect on our business in the
future.





ITEM 1A.
RISK FACTORS





In
addition to the other information set forth in this report, you should carefully
consider the factors discussed in Part I, Item 1A “Risk Factors” contained
in our Annual Report on Form 10-K for the fiscal year ended January 2,
2010, which could materially affect our business, financial condition or future
results.  Except as set forth below, there have been no material changes
from the risk factors disclosed in our Annual Report on Form 10-K.
  The risk factor under “RISKS RELATED TO OUR INDUSTRY” entitled
“Recent discussion of US
Healthcare reform may impact our medical device customers or business
directly.” is replaced in its entirety by the following:





The impact of the
recently enacted federal healthcare reform legislation on our business remains
uncertain.





In
March 2010, the U.S. Congress adopted and President Obama signed into law
comprehensive health care reform legislation through the passage of the Patient
Protection and Affordable Health Care Act (H.R. 3590) and the Health Care and
Education Reconciliation Act (H.R. 4872).  Among other initiatives, these
bills impose a 2.3% excise tax on domestic sales of medical devices following
December 31, 2012, which is estimated to contribute approximately
$27 billion to healthcare reform. Various healthcare reform proposals have
also emerged at the state level. The excise tax may impact results of operations
following December 31, 2012, however we cannot predict with certainty what
healthcare initiatives, if any, will be implemented at the state level, or what
the ultimate effect of federal health care reform or any future legislation or
regulation will have on us.





Many of
the details of the new law will be included in new and revised regulations,
which have not yet been promulgated, and require additional guidance and
specificity to be provided by the Department of Health and Human Services,
Department of Labor and Department of the Treasury. Accordingly, while it is too
early to understand and predict the ultimate impact of the new legislation on
our business, the legislation could have a material adverse effect on our
business, cash flows, financial condition and results of
operations.





ITEM 5.
OTHER INFORMATION





As
previously reported, the employment of John Hynes, the Corporation’s Chief
Operating Officer of European Operations, ended April 22, 2010.  The
Corporation adhered to the terms of his original employment agreement, which was
entered into on October 17, 2007 and such was filed on Form 8-K on November 8,
2007.  On June 9, 2010 the Corporation entered into an additional
agreement, a compromise agreement, with Mr. Hynes and such was filed on Form 8-K
on June 16, 2010.





ITEM 6.
EXHIBITS





10.45...
            
            Compromise
      Agreement of Mr. Hynes (incorporated by reference to Exhibit 99.1 to our
      Form 8-K filed June 16, 2010).10.46...
            
            Second
      Amendment to Employment Agreement, dated as of June 10, 2010, by and
      between Symmetry Medical Inc. and Brian S. Moore (incorporated by
      reference to Exhibit 99.2 to our Form 8-K filed June 16,
      2010).10.47
            
            Limited
      Waiver to Amended and Restated Credit Agreement, executed August 4, 2010,
      among Symmetry Medical Inc., as Borrower and Wells Fargo Bank, National
      Association (as successor by merger to Wachovia Bank, National
      Association), as Administrative Agent for the
  Lenders.*




20





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.*





* Filed
concurrently herewith.


... Indicates
management contract or compensatory plans or arrangements required to be filed
as an exhibit.




21


SIGNATURES





Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.





SYMMETRY MEDICAL INC.By
            /s/ Brian S. MooreBrian S. Moore,President and Chief Executive Officer(Principal Executive Officer)By
            /s/ Fred L. HiteFred L. Hite,Senior Vice President and Chief Financial Officer(Principal Financial Officer)





August6,
2010


22