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EXHIBIT 99.1
Sofamor Danek Group [letterhead] NEWS RELEASE
Contact: James J. Gallogly
President and Chief Operating Officer
Laurence Y. Fairey
Executive Vice President
(901) 396-2695
SOFAMOR DANEK GROUP ANNOUNCES ONE-TIME CHARGE
RELATING TO COSTS OF PRODUCT LIABILITY LITIGATION
Memphis, Tennessee (January 6, 1997) - Sofamor Danek Group, Inc. (NYSE:SDG)
today announced that its upcoming 1996 financial results will include a pre-tax
charge of approximately $50 million relating to costs associated with the
product liability lawsuits in which the Company is a defendant.
"We have taken this charge in order to recognize the reasonably
anticipated costs associated with these product liability cases, which we
believe are without merit and unfounded," stated Ron Pickard, chairman of
Sofamor Danek Group, Inc. "The establishment of this reserve symbolizes our
commitment to demonstrate that our products are beneficial to patients and that
the lawsuits are baseless."
"Today's announcement addresses reasonably foreseeable costs that we
are now better positioned to estimate as the litigation has progressed and as
changes have occurred in facts and circumstances relating to the litigation in
the fourth quarter," commented James J. Gallogly, president and chief
operating officer. "We believe that this charge will allow our future
financial results to reflect clearly the financial health of our business.
Despite the potential distraction of this litigation, the Company's operating
management has remained focused on the development of innovative products and
meeting the needs of our customers."
As previously reported, Sofamor Danek Group is a defendant in
approximately 2,800 individual product liability lawsuits. Early efforts by
the plaintiffs to seek certification of class actions were denied. The
majority of individual claims were filed thereafter. The suits assert numerous
theories of liability arising out of instrumented fusion surgeries in which the
surgeon elected to fasten the instrumentation to the spine using a bone screw
in one or more posterior pedicles of the spine. Many other manufacturers of
internal fixation devices have been sued by patients who have undergone spinal
fusion surgery in which screws which they manufactured have been utilized. The
Company has been joined as an alleged co-conspirator along with the majority of
other manufacturers in approximately 2,850 such lawsuits.
The Company has national coordinating counsel and over 40 regional
counsel defending against the claims. Discovery has been ongoing in certain of
the cases filed first, and hundreds of
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SDG Announces One-Time Charge
January 6, 1997
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thousands of documents have been produced and over 1,000 depositions have been
taken. In addition, both the Company and the plaintiffs have exchanged
numerous expert reports.
The Company believes that it has defenses to these lawsuits, including
defenses based upon the failure of a cause of action to exist where no
malfunction of the implant has occurred or the plaintiff has suffered no injury
attributable to the Company's product, the expiration of the applicable statute
of limitations and the learned intermediary defense. The Company has and will
continue to assert the defenses primarily through the filing of dispositive
motions.
While it is difficult to predict accurately the outcome of litigation,
the amount of the charge taken in the fourth quarter represents the Company's
best judgement of the probable reasonable costs (in excess of available
insurance) to defend and conclude the lawsuits based on the facts and
circumstances currently existing. The costs provided for include, but are not
limited to, legal fees paid or anticipated to be paid and other costs related
to the Company's defense and conclusion of these matters.
The actual cost to the Company could differ from this estimate and will
be dependent upon a number of factors that will not be known for some time,
including, among other things, the resolution of defense motions and the extent
of further discovery. Although an adverse resolution of the lawsuits could
have a material effect on the Company's results of operations in future
periods, the Company does not believe that these matters will in the
future have a material adverse effect on its consolidated financial position.
The Company, however, is unable to predict the ultimate outcome or the
potential financial impact of this litigation.
The foregoing discussion (including, in particular, statements made in
the second, third, seventh and eight paragraphs of this press release) contains
forward-looking statements relating to the ongoing lawsuits. Such
forward-looking statements involve risks and uncertainties principally
regarding the resolution of the Company's defense motions, the conclusion of
individual lawsuits, the actual costs to defend the cases and other
uncertainties detailed from time to time in the Company's periodic reports
(including the Annual Report on Form 10-K for the year ended December 31, 1995,
and the Quarterly Report on Form 10-Q for the quarter ended September 30, 1996)
filed with the Securities and Exchange Commission. In connection with this
announcement, the Company intends to file a Form 8-K describing in more detail
certain of the matters addressed in this press release.
Sofamor Danek Group, Inc. is primarily involved in developing,
manufacturing and marketing spinal devices used in the surgical treatment of
spinal disorders. The Company's stock is traded on the New York Stock Exchange
(NYSE) under the symbol SDG.
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