Medical-device maker Stryker Corp. reported a precipitous drop in earnings for the first quarter of 2014 as hefty charges from product recalls reversed revenue gains from strong sales.
Stryker earned $70 million in the quarter ended March 30, down 77% from the same period last year. Revenue, meanwhile, climbed to $2.31 billion, up 5% from 2013.
The earnings slide driven largely by $344 million in charges connected to a voluntary recall in 2012 of its Rejuvenate and ABG II modular-neck hip stems because of potential risks associated with fretting and corrosion. Also in 2012, Stryker also recalled its Neptune Waste Management System, which is used to collect and dispose of fluid waste, after receiving reports of injuries and death involving incorrect application of the device's high-flow suction.
Kalamazoo, Mich.-based company's bottom line was also affected by an uptick in research and development expenses primarily connected to recent acquisitions.
Net sales were up in each of Stryker's three main divisions—reconstructive, medical-surgical, and neurotechnology and spine.
“The strength of our diversified model was once again demonstrated in the first quarter with solid organic growth of 5%,” President and CEO Kevin Lobo said in a news release. “Our continued investments in internal innovation, coupled with our recent acquisitions, position us well to meet our customers' evolving needs.”
In a call with shareholders Tuesday in advance of the earnings release, executives said Stryker is looking for more acquisitions to drive sales growth. In the first three months of 2014 the company completed two deals, acquiring Pivot Medical and Patient Safety Technologies. This month the company acquired Berchtold Holding, a German company that makes equipment such as surgical tables and lighting systems.
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