8-KEarnings & ResultsRegulation FDExhibits & Filings

CARDINAL HEALTH INC 8-K Report, Financial Results (Feb 4, 2005)

Filed February 4, 2005For Securities:CAH

Summary

This 8-K filing from Cardinal Health, Inc. (CAH) on February 4, 2005, primarily provides an update on ongoing investigations and the company's financial reporting. The company is cooperating with an SEC formal investigation, which began informally in October 2003, and a U.S. Attorney inquiry, both related to accounting practices, particularly revenue classification within its Pharmaceutical Distribution business and the timing of recognizing certain supplier discounts and revenue in its Automation and Information Services segment. As a result of an internal review conducted by the Audit Committee, Cardinal Health determined that financial statements for fiscal years 2000-2003 and the first three quarters of fiscal 2004 require restatement to reflect accounting conclusions related to these matters. The company has also taken disciplinary actions against employees deemed responsible for these financial statement issues, with the controller, Gary S. Jensen, resigning. The filing notes that investigations are ongoing, and there is no assurance that further restatements or actions may be required. A separate internal review is also underway concerning the accounting treatment of recoveries from vitamin manufacturers.

Key Highlights

  • 1Cardinal Health is cooperating with a formal SEC investigation and a U.S. Attorney inquiry regarding accounting practices, including revenue classification and supplier discount recognition.
  • 2The company's Audit Committee conducted an internal review, concluding that financial statements for fiscal years 2000-2003 and Q1-Q3 FY2004 need restatement.
  • 3Disciplinary actions have been taken against employees responsible for the identified financial reporting issues, including the resignation of the company's controller.
  • 4A separate internal review is ongoing concerning the accounting treatment of recoveries from vitamin manufacturers.
  • 5The company is unable to predict the ultimate outcome of these investigations and reviews, which could result in further restatements or penalties.
  • 6The filing includes a press release and related information regarding the company's financial results for the second fiscal quarter ended December 31, 2004, which is furnished but not deemed filed.

Frequently Asked Questions

The investigations, by the SEC and the U.S. Attorney, focus on the classification of revenue in the Pharmaceutical Distribution business (specifically 'Operating Revenue' versus 'Bulk Deliveries to Customer Warehouses and Other') and the timing of revenue recognition and supplier discount accruals in other segments. There is also a separate review concerning recoveries from vitamin manufacturers.

The Audit Committee's internal review found issues that necessitate restating financial statements for fiscal years 2000, 2001, 2002, and 2003, as well as the first three quarters of fiscal year 2004. These restatements were reflected in the 2004 Form 10-K.

Yes, the company has taken disciplinary actions against employees identified as responsible for the financial statement matters. This has included terminations, resignations, required repayment of bonuses, and letters of reprimand. The company's controller, Gary S. Jensen, resigned effective February 15, 2005.

The SEC investigation, U.S. Attorney inquiry, and internal reviews are ongoing. Cardinal Health cannot predict the outcome, which could potentially lead to further restatements, amendments to prior filings, additional disciplinary actions, or legal proceedings involving fines, penalties, and other sanctions.