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On Stryker, Taxes, the Super Committee and Growth
Obama’s Affordable Health Care Act of 2010 was paid for (in part) with an excise tax on implanted medical devices. The 2.3% excise tax goes into effect in 2013. It’s already causing some of those “unintended consequences” that we keep hearing about:
Top News
Stryker to cut jobs to offset excise tax impact
Thu, Nov 10 18:18 PM EST
Nov 10 (Reuters) - Medical device maker Stryker Corp said it will cut 5 percent, or about 1000 jobs to largely offset costs related to the scheduled implementation of the new Medical Device Excise Tax in 2013.
Steve Ferguson, the chairman of Cooke Group (another device manufacturer) had this to say about the excise tax:
"Many companies are being forced to limit investments in R&D in the U.S. and go abroad. Further, many companies are looking to reduce their U.S. capital investment. For Cook, we had planned on making additional investments in U.S. communities. Now, because of the tax, those plans are on hold."
I hope that this small example will confirm to any doubters that tax increases do have consequences. When taxes go up, jobs are lost. Investments in new plant and equipment are either deferred or are made outside of our borders. It’s that simple.
Stryker’s stock (SYK) has been in the doghouse of late. It’s down 22% since the establishment of the Super Committee (mandatory cuts in medical spending). The stock market has done what it’s supposed to do; adjust the multiple to reflect the changing realities.
SYK was trading at a 16X PE on Friday. That multiple might be justified. After all, Stryker is a pretty good company. You can’t go to a hospital without using their stuff. They make the beds you lie on and the scalpels they cut you with.
They are also high tech. They make gizmos that will suck out your gall bladder in just a few minutes and leave a few small holes. They’re big in devices (hips, knees etc.).
The company is consistently profitable and has nice (15%) margins. It’s sitting on $3b of cash and functionally has no debt. For the suckers who think that dividends are the key to wealth SYK pays 1.5% and there’s every reason to believe the payout will grow. If one wanted to get a play on the global growth story, SYK is on the list. They’re everywhere. With rising incomes in Asia and aging populations in the West one would think the company is sitting pretty.
On the other hand, one could look at recent results. All the important lines are flatter then a pancake. What's the right multiple when top line is dead and the future is not so bright?
There are only 7 days left before the Super Committee efforts are to be released (they have to publish a plan 48 hrs before the 11/23 deadline). My sense has been that there will be no deal. That was confirmed today listening to the talk shows. We’re going to get big cuts in both healthcare and military spending as a result.
I wonder if the stock market has fully priced in the consequences for the few dozen companies whose future growth (or lack thereof) will be confirmed in a week. I also wonder what the big macro economists and players like the CBO, OMB, SSA and the IMF will say about revisions to US growth.
My guess is that the stock market has not fully priced this in and I’m convinced that the conclusion by the deep thinkers will be that long term US growth prospects have to be revised down, not up.
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Modern economics and finance has no model for non- growth or negative growth. That's because it's fundamentally based on a pyramid scheme where money and revenue constantly get sucked from the bottom to the government and the wealthy 1%.
Ponies don't ever, ever run backwards. There is no reverse gear- it continues functioning as a pyramid until its sucked dry and then the foundation explodes.
This one will be huge, since the private sector has had a huge hand in creating all that money supply and credit that evaporated. The UsG and Fed could never print fast enough to prevent a full contraction in the world. They spout GDP growth which is some phones baloney number.
Bruce, your pedagogic ideology is hanging out and making you look stupid. Seriously. I am going to fire 1000 people today because two years from now things might suck by another 3%? Right.
Remember we have no money to provide social security retirement income, but we have money for Obamacare? Bullshit.
Reality... we don't have money for anything ... and we won't for a long time
notice how every single "remedy" thought up has as part of it, a solution which is return to growth.
Deficits in Italy are solved by growth. Get deleveraging under control so we can return to growth. Once we do xyz, we can resume growth.
Growth growth growth. Everything is predicated upon growth. It's in every single fucking statement on the economy.
The problem is that we're not growing and won't. Have any of these idiots ever considered the point at which growth is no longer possible or whether attempting to grow perpetually is even a good idea? NO. This is why these efforts will fail.
"cuts in military spending".....
?????
Huh.!
Put the bottle down Bruce,you are drunk,already.
wow, there a lot more tax lovers than I would have thought here at ZH. I just don't have confidence in the government to do anything right and therefore the less it is fed the better.
excise taxes are ultimately end user taxes like sales tax - they are or can be passed on in the sale of the device - this has no effect on the insurance companies paying or not paying the claim nor the choice for the medical solution for the patients problem except - if not passed thru - in which case it is a 00.345% effect on gross profit margin
stryker is engaged in pure propaganda in tying back plans for a reduction in force to something unrelated except for the political statement they want to promote
until all taxes are completely on the the back of 99%'s labor compensation they will regard all other taxes as bad
You have no clue. The tax on medical devices means that fewer devices can be bought since there is a limited budget for medicare and insurance companies. Sales will be reduced by 2.3%. It's simple, but dolts like you don't get it.
So, that's why they're cutting overhead (firing people) today for that tax that is way off in the future -- and is less than a sure thing? Your math sounds like Stryker's calculations. Don't trust 'em as far as I could throw 'em.
For most Stryker products, the insurance company is not the customer, the medical service provider is. Insurance companies do not pay for bariatric hospital beds; hospitals do. As hospitals revenues fall, tax or no tax, as a result of cuts in reimbursement from Medicare and Medicare HMOs, hospitals cut back where they can. Once they reach a point where staff can no longer be laid off (and lay offs are coming in health care), they cut back on durable medical equipment. It is as simple as that. Stryker knows this and is acting preemptively. Hospital reimbursements rates are already scheduled to go down the first of the year. Long-term care facilities have already seen an 11% drop in reimbursements. Calling names is not going to lead to a reasonable discussion of what is occuring in American healthcare and how companies are affected by it.
Ah shit come-on Bruce, look at the gross margins. Drug dealers wish they had it this good. 2.3% is nothing. Even if it applied to all cost of goods sold which I'm guessing it doesn't . Anyone who believe that 2.3% is coming off of net margins, please take a basic accounting class. 68% gross margin?
Cough(Horse shit). This from their latest quarter too but it is consistently in this range through-out the rest of the quarters.
They spend 7:1 on sales and General administrative over R and D. I can't believe a group, sophisticated in all matters of finance would jump to bullshit political reasons before looking at a goddamn income statement. Fuck all of you turds for falling for this.
Hey stupid, try taking a basic accounting class.
Net profits = Sales - COGS - Expenses
Only a retarde fucking imbecile thinks that
Profits = Sales - COGS
Retarded motherfuckers like you are the reason Obozo was elected
First off, eat shit and die motherfucker. if still alive, then call I-AMA-DICK . They have an accounting control fraud division that will s.lo.w.l.y explain it to you.
They have a 68% gross margin of which they waste/spend some 800 Million with 100 Million on R & D in one quarter.
You fucking low life piece of regurgitated dog-shit. . If they had to eat the fucking excise tax, they cut 5% a quarter out of SGA
R &D, a catch-all for corporate expenses they want to hide, stays static.
But you know they won't have to eat shit. 55% of next years 12% price increase will be more kick backs to the surgeons that use their devices maintaining sales and margins. Their bonuses will go up so they hoard the fucking money as 70 Million paid to the 1000 workers will be erased from the community. Which ultimately will cause it to go bankrupt and guess who gets stuck with the fucking bill. I imagine of they paid any taxes , they excise fee could be made to go away.
Only in America does a Public corporation get to keep two sets of books. Shareholders are fooled into thinking they actually pay taxes. All they do is set up a slush fund and charge the US operation royalties when they file corporate tax returns with -0- owed. If you want to keep paying for that shit, then you are a fucking asshole in the first degree. If you believe the GOP has the answer anymore that I believe the corrupt Dems have the answer, you are just an ignorant slut. These guys didn't pay their dues to Washington is the only reason they are hit by an excise tax. Can't get around those bribes Mortimer.
Now FUCK-OFF
this was just an institutional beatdown to the fagboy suntzu.
I'd hate to be sun tzu right now. His butt is a-smokin'. I won't argue the points cause it's not my area, but you sure know how to sling a syllable.
No complaining from MCD over OCare... Stryker needs to pay the VIG and get an exemption for their products. Hahahahahaha!
There are no taxes of ANY kind kind in Greece, perhaps bullshit purveyors like BK can move over there.
The excise tax a bullshit excuse for cutting 1000 jobs. Everywhere there is an excise tax is passed on to the consumer.
That 1000 employees that were laid off for a tax that isn't even in effect until 2013 is either an excuse for the company that's seeing slack demand because of the rising cost of health care that they contribute mightily too, or some lazy biased reporting. It's year-end bonus time. That means people who can't afford it must go. Since traditional year-end lay offs hasn't been greeted with a huge increase in share prices, quite the contrary, a 2.3% excise tax is blamed that they aren't paying.
Odds are that demand has slackened for these devices as less people can afford insurance and or can't pay cash as the device companies and big Pharma do exactly what the "health" insurance companies do; the cure for a shrinking customer base is to raise prices on the customer base that can afford to pay. That's why top line revenues and bottom line profits are flat-lined at most of these companies.
This is the only play they have. Sales Down? Raise prices. Can't let the street see slipping gross margins.
Blame lay-offs on taxes that haven't been paid for a tax that hasn't been implemented that would have been offset by corporate income taxes channeled outside of the USA anyway even if they managed to transfer the excise tax to the payer who in turn would raise prices for the consumer. That's what these C-Suite gets 10-100s of millions for ; intelligent responses like the above to market forces.
That was lazy reporting Bruce.
Hey stupidfucker, the medicare budget is fixed. Most endusers of these medical devices do not pay out of pocket. The insurance companies aren't going to fork out the extra money. Guess what happens?
See above, they didn't pay their dues..douchebag.
Bruce, Norquist was on C-SPAN this morning and said he thinks the Democrat contingent could essentially blow up the entire process by not agreeing to any reductions ( in the rate of increase, mind you ) in "entitlement programs," and counter with the cry of intransigence, ( re: tax increases ) on the part of Republicans.
Governance by committee. An American Presidium...just like its Soviet ancestor, unworkable, and will be discredited in the end.
The problem is that this tax cannot be passed onto the customers in the U.S., because the customers are health-care providers and they experiencing a margin squeeze. The reimbursement rates for Medicare and all the Medicare HMOs has declined and is declining. The cost of prescription drugs, which in some cases is also a cost incurred by Stryker's customers, continues to rise. Obamacare was written by insurance companies and pharmaceutical companies-- not medical service providers or durable medical equipment manufacturers. Is it no wonder that the companies that benefit are insurers and pharmaceuticals and the companies that suffer are durable medical equipment manufacturers and medical service providers. Welcome to crony capitalism.
$3B cash, 15% margins == we can't afford excise taxes (that are passed on to consumers anyway, especially for inelastic products like f'ing medical devices)?!
We want our bonuses to read $X so we had to lay off N peons and replace them with oompaloompas. - The Management
Why don't you fuckhead fleabaggers start a medical device company, make 10% margins and hire a bunch of people?
IMO 4 + more years of Barach H. Obama and the private job sector will be obliterated. Even now the question is how do you turn this monster job and debt mess around. President Obama wants to expand and grow government and that will likely make the hole in our debts that much larger.
Granted there are no easy answers and it is certain neither party is willing to work with the other. Leadership in government seems to only work for their own benefit more so than ever. Never in my lifetime has the word oligarch been considered a part of American life until under this current president. Crony capitalism is again a phrase that was never uttered much until recently. Trillion dollars is thrown around now like a billion used to be and again has become prominent under this president. I'm numb with the thought that this failure for a president can get even one vote with the record of unemployment and utter class warfare he foments.
I've never been so pessimistic when it comes to the future of the US.
Actually, they all want to expand government. Eisenhower was the last president to actually have a budget smaller than the previous years budget.
Ron Paul, if elected, will reset that shot clock. No one else will.
Regards,
Cooter
How much money does the Styrker implant product line add to Styker's bottom line compared to all the other products sold by Stryker?
Does Stryker make a penny in the private sector? If there is any correlation between excise, sales, income taxes and employment than I must be 600 foot Jesus. One would think that Nevada with no Income tax and corporate tax by appointment would have the highest employment rate? How about Florida?
One would think that Clownifornia and Illinois with the highest corporate income taxes would have the lowest unemployment? How about Cuba that takes almost everything people work for? How's their economy? I'm sure as the fleabaggers tell us, people love to work hard and have the government take all of their earnings to buy votes and give to their cronies.
I don't need the IRS, BIS, GAO, IMF, or any other alphabet soup agency to tell me there isn't going to be any growth. As long as Barry Soetero is prez, there isn't gonna be ANY REAL GROWTH. Growth is for capitalists. What he wants and is doing is transformation. As in I take your money and give it to whoever the fuck I want.
How and why people haven't figured this out yet is beyond me. A socialist tool.
http://vegasxau.blogspot.com
Why have an elected Congress if they won't do their job and delegate it to some committee. Congress created this boondoggle, and odds are, they will rescind everything when they find that, like most of their grand scheme, it won't work either. Then they can find some other excuse to kick the can down the road and spend us into oblivion until the music finally stops.
When did Congress last declare war? Is there some similarity here? Everybody wants the political job (perks), but not the consequences of actually DOING the job. They get to give themselves raises, prevent insider trading from applying to them, investigate their own crimes... Well, we all know the list. It's just a country club that keeps raising the membership requirements, and everyone is on the board. How cute.
What is missed here is that SYK and all similar companies that suckle on the .gov teat are a product of of debt based ponzi monetary system. As BK pointed out yesterday, companies like GE and the like can not survive without fractional reserve banking...it's the engine of exponential fantasy growth in perpetuity.
Obamacare. Shut.It.Down.Completely.
STFU already.
And in conclusion: Obamacare. Shut.It.Down.Completely.
Dodd Frank too
Gov. Perry had an interesting take on foreign aid during last night's deeebate - that is, start with $0.00 and ask a country why we should give them aid and then dispense it accordingly. I propose taking it one step further, have American citizens pay $0.00 tax and ask the government why we should give them our hard earned money and then dispense it accordingly. Taking into account current situations, I think we all would be extremely niggardly.
Heh, niggardly. Reminds me of this classic faux billboard:
http://www.tonypierce.com/images/2005/6/blogpics/niggardly.jpg
As part of the endless, pointless Republican debates this question should be asked to every candidate:
As President, will you end Obamacare?
I don't really care what else they have to say. I know outside of Ron Paul they will not end the FED or the wars.
The problem is that the President can't end Obamacare...the Congress has to do it. It is like so many other things, the law gets passed and the politicians get voted out, but their crappy laws stay on the books forever. How about asking your Congressman/woman to repeal the law then maybe the President can sign off to make the bill/repeal active law.
The President can give everyone a waiver. Obozo has already given waiver to over 3,000 of his criny corporation and union groups. Congress gave themselves waivers. Just give a blanket waiver
In the post 9/11 world it seems the President can do whatever he wants, so why can't the President kill Obamacare? In any case I want a President who says in public out loud, "I want Obamacare ended." I am not writing a fucking letter to my fucking congressman.
I want you all to get up. Get on your feet. Go to your window, open it and shout "I want Obamacare ended and I want it ended now".
Ron Paul has been saying that consistently.
http://www.youtube.com/watch?v=Ka1ym7S3F3w&NR=1
Ron's a good guy. The rest of the Republican's should disavow Obamacare as well.
Janice, Boehner has already passed the buck regarding repeal; preferring to wait, instead, for the SCOTUS to rule from on high.
Frankly, even then, Boehner or his successor will find some excuse or several, not to commence repeal procedures...they are statists; every man-jack one of them.
Since Obamacare is one of the key items that will ensure the destruction of America, it seems obvious that SCOTUS will uphold it. After all, these 9 NWO whores have already made the personhood of corporations the ultimate corruptor of the political process.
Since Obamacare is one of the key items that will ensure the destruction of America, shut it down now.
The Stupor Committee is doing exactly what it was intended to do....deflect heat while the remaining critters continue to do NOTHING