Smith & Nephew (FTSE:SN, NYSE:SNN) CEO Olivier Bohuon walked back earlier statements blaming roughly 100 layoffs on the U.S. medical device tax, saying the media got the story wrong.
Last week a Smith & Nephew spokesman told MassDevice.com that the job cuts were aimed at offsetting the impact of the tax, a 2.3% levy on all U.S. sales that went into effect Jan. 1 as part of the healthcare reform law.
"The nearly $30 billion tax on medical devices that took effect Jan. 1, 2013, has impacted a number of companies across the U.S.," spokesman Joe Metzger told us. "Smith & Nephew is not immune from this added expense burden."
But last week, during a conference call with analysts discussing SNN’s Q4 and 2012 results, Bohuon contradicted that statement, saying the media got the story wrong.
"This has nothing to do with the Obamacare. This has to do with us willing to be fit and effective for the future," Bohuon said. "So what folks, TV in Memphis or the Memphis Times has written is just wrong. It’s just a mix of things in the environment that we have seen a year ago, having driven us to make the changes we are making. And this is why it is what it is. So I mean, the 63 people have nothing to do with the Obama Care per se. It’s just wrong."
That said, Bohuon didn’t downplay the impact of the tax during the call.
"The cost of the U.S. medical device excise tax is significant. While I believe we will be able to absorb it completely over time, as I’ve said during the capital day, it is a material headwind this year," he said.
The British healthcare giant’s chief also confirmed the numbers on the layoffs, saying about 63 positions would be eliminated in Memphis, about 20 in Boston and around 12 in Europe.
In a statement issued in response to Bohuon’s comments last week, Metzger said his comments on the medtech tax referred to SNN’s U.S. business and Bohuon’s were on the company’s global enterprise, telling the Memphis Commercial Appeal that their remarks were "consistent."
"As stated, Smith & Nephew in the U.S. took a number of actions that resulted in the loss of less than 100 positions in Tennessee and Massachusetts, citing a need to reduce costs locally to help absorb the impact of the new medical device excise tax," Metzger told the newspaper. "Simultaneously in Europe, we also announced a reduction in staff and plans to shut a facility in Belgium due the need to counter the effects of the continuing austerity measures in Europe."
Smith & Nephew is in the midst of a multi-year layoff plan. A year ago the company said it would cut 7% of its global workforce, or about 770 workers, over a period of 3 years aiming to save $150 million annually. About 220 layoffs had already been completed when the announcement was made.
The medical device tax, the 1st payments for which were due at the end of January, is likely going to cost Smith & Nephew $25 million this year, Metzger told MassDevice.com.
SNN shares closed Feb. 8 at $56.25 apiece, up 2.9% on the day.
