St. Jude Medical (NYSE:STJ) officials told investors yesterday that its recently announced layoffs aren’t directly related to anext year’s medical device tax, as had been widely speculated.
John Heinmiller, former CFO and current executive vice president, said that although the medical device tax is one of many cost pressures facing St. Jude, to the tune of an estimated $50 million-60 million per year – the same amount of savings the cuts are expected to generate.
"It’s a coincidence that [it’s the same amount] of what the excise tax would be," Heinmiller said. "There are a lot of different cost pressures we’re facing. One of those is the medical device tax."
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Instead, Heinmiller said, the cuts are the result of management’s evaluation, "taking advantage of natural synergies."
St. Jude announced August 30 plans to lay off 300 employees and slim from 4 divisions to 2, implantable electronic systems ) and cardiovascular and ablation technologies. The realignment is aimed at reducing annual pre-tax operating expenses by about $50 million-$60 million beginning in 2013.
The restructuring is expected to cost $50 million-$80 million, including employee termination costs, accelerated depreciation, asset impairments and other charges, according to a company report.
Although the medical device tax wasn’t the direct cause of the cuts at St. Jude, Heimiller didn’t try to downplay the levy’s effect on his company or the entire industry.
People are "under-appreciating the level of complexity" involved in the tax, he said. "It’s due every 15 days, so you have to have good reporting in place."
Heinmiller, who gave up his post as CFO in the realignment, said he was not leaving the company and was planning to stay on for the foreseeable future.
