8-KOther Events

STRYKER CORP 8-K Report, Corporate Update (Jun 5, 2012)

Filed June 5, 2012For Securities:SYK

Summary

Stryker Corporation (SYK) has disclosed in an 8-K filing dated June 4, 2012, that it is in discussions with the U.S. Department of Justice (DOJ) to settle a 2010 subpoena related to the sales and marketing of its OtisKnee device. The company has offered $33 million to resolve allegations of violations of federal laws concerning the sale of a device not cleared by the FDA. This potential settlement is a significant development for investors, as it addresses a legal overhang that has been ongoing since 2010. The company expects to record a non-tax deductible charge of $33 million in the second quarter of 2012, representing its best estimate of the minimum probable loss. This charge is projected to reduce reported diluted earnings per share by approximately $0.09 for the quarter but will be excluded from adjusted diluted earnings per share, providing insight into the company's operational performance excluding this legal matter.

Key Highlights

  • 1Stryker offered $33 million to the DOJ to settle a subpoena concerning the OtisKnee device sales and marketing.
  • 2The subpoena alleges violations of federal laws related to the sale of a device not cleared by the FDA.
  • 3A non-tax deductible charge of $33 million will be recorded in Q2 2012 for the settlement estimate.
  • 4The charge is expected to reduce reported diluted EPS by approximately $0.09 in Q2 2012.
  • 5This $0.09 EPS impact will be excluded from adjusted diluted EPS.
  • 6The company is seeking to resolve a legal matter that began with a DOJ subpoena in 2010.
  • 7There is no assurance of a consensual resolution or the final terms of any settlement.

Frequently Asked Questions

The DOJ investigation, initiated by a subpoena in 2010, concerns allegations of violations of federal laws related to the sales and marketing of Stryker's OtisKnee device, specifically for a device that was allegedly not cleared by the U.S. Food and Drug Administration (FDA).

Stryker has offered $33 million to the DOJ to settle the matter. The company will record a non-tax deductible charge of $33 million in the second quarter of 2012, which is its best estimate of the minimum probable loss. This charge is expected to reduce reported diluted earnings per share by approximately $0.09 for the quarter.

The $33 million charge will be recognized in the second quarter of 2012 and will reduce reported diluted earnings per share by approximately $0.09. However, this charge will be excluded from Stryker's adjusted diluted earnings per share, allowing investors to see the operational performance separate from this legal settlement cost.

No, the filing explicitly states that there can be no assurance that Stryker will reach a consensual resolution, when such a resolution might occur, or what the final terms of any such resolution may be. The $33 million represents the company's best estimate of the minimum probable loss.