Stryker offers $33M to settle DOJ knee implant inquiry

Stryker ($SYK) expects it will pay $33 million to settle a federal investigation into the sales and marketing of its OtisKnee device implant.

The Kalamazoo, MI maker of orthopedic device implants disclosed in a regulatory filing that it had offered the settlement amount to the U.S. Department of Justice. As Reuters notes, the department subpoenaed the company in 2010 alleging that it violated federal laws by selling a device the FDA hadn't yet cleared for marketing.

Interesting--this issue gets potentially tricky--because Stryker also discloses that it hasn't received a final agreement with the DOJ yet. Even with that uncertainty, the company said it will take a $33 million charge in the 2012 second quarter, "representing the best estimate of the minimum of the range of probable loss to resolve this matter." Stryker cautions that it's not sure when the final agreement will come or "what the final terms of any such resolution may be."

That $33 million charge will reduce Stryker's diluted net earnings per share by about 9 cents for the second quarter, and will be excluded from the company's adjusted diluted net earnings per share. Reuters points out that Stryker's shares didn't change in after hours trading Tuesday, remaining at $50.79 after gaining 1.9% during the trading day.

Stryker faces the extra cost as it proceeds with plans to restructure and slash 5% of its workforce--about 1,000 jobs--in a cost-cutting move the company blames on both a slowdown in elective procedures and the looming medical device excise tax. The company hopes the effort will help it reduce pre-tax operating costs by more than $100 million starting in 2013.

- here's Stryker's regulatory disclosure
- read Reuters' take

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