Smith & Nephew CEO says Memphis media reports on layoffs cause were ‘just wrong’

Smith & Nephew CEO says Memphis media reports on layoffs cause were ‘just wrong’ (Memphis Business Journal)

While confirming the company laid off 63 people in Memphis, Smith & Nephew PLC CEO Olivier Bohuon also directly contradicted a statement the company issued last week when it originally made the layoff announcement.

During the company’s full-year 2012 earnings conference call Thursday, Bohuon said the company laid off 63 employees in Memphis “about 20 in Boston, and something like 12 in Europe, I think.”

On Jan. 31, Smith & Nephew announced the layoffs and released the following statement:

“The nearly $30 billion tax on medical devices that took effect Jan. 1, 2013 has impacted a number of companies across the U.S. Smith & Nephew is not immune from this added expense burden. Unfortunately, and in order to absorb this cost burden into our business, this has meant less than 100 positions have been made redundant across various departmental functions in our Tennessee and Massachusetts sites. The company is providing the affected employees with a comprehensiveseverance package and outplacement support.”

Bohuon called the layoffs a follow up of the company’s value plan, and said published Memphis media reports — including one in MBJ — were “just wrong.”

The value plan Bohuon spoke of most likely refers to an announcement Smith & Nephew (NYSE: SNN) made in February 2012, when it said it would lay off 7 percent of its global employees. It had already laid off 80 Memphis workers in December 2011 as part of a company restructuring. The company employs just over 1,800 people locally.

Since the 2.3 percent excise tax was announced as part of the Affordable Care Act, device companies, including Kalamazoo, Mich.-based Stryker Corp. (NYSE: SYK), began announcing their intent to lay off workers because of the tax. Companies like Smith & Nephew and Wright Medical Group Inc. (NASDAQ: WMGI) have restructured their businesses and laid off employees over the last two years. However, device industry analysts have said the tax could end up costing 43,000 jobs nationwide, particularly in companies that weren’t profitable to begin with.

Layoffs and expanding overseas markets are ways companies could deal with the impact the tax would have on their bottom lines, Dan Matlis, president of Axendia, a Yardley, Pa.-based life sciences and health care analysis firm, said in a storypublished in the today’s print edition of MBJ.

In that report, Medtronic Inc. (NYSE: MDT) estimated the tax would have a $50 million global impact before its fiscal year ends in April. Smith & Nephew hasn’t released what it estimates the impact of the taxwill be; the company’s 2012 revenue was more than $4.13 billion.

(Subscribers can click here to read the full print edition story.)

The four device companies mentioned above — Medtronic, Smith & Nephew, Stryker and Wright Medical — were all trading at or new 52-week highs on Friday.

The fact that the excise tax will force device manufacturers to change the way they do business hasn’t been disputed, but the ways companies respond to the tax is still shaking out.

“There is going to be a need for a deep analysis of the excise tax on the industry based on facts,” Matlis said. “There are a lot of statistics and prognostication, and companies are expecting a higher tax bill. Even if you’re a larger company, $100 million is still $100 million.”

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Josh Sandberg

Josh Sandberg is the President of Ortho Spine Partners and Partner for The De Angelis Group. He also serves as Co-Founder and Editor of OrthoSpineNews.

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