Summary
This 8-K/A filing by Cardinal Health, Inc. (CAH) on August 30, 2005, serves as an amendment to a previous filing on August 5, 2005, concerning their fiscal year and fourth-quarter results for the period ending June 30, 2005. The amendment primarily addresses specific adjustments to previously reported financial figures within their Pharmaceutical Distribution and Provider Services (PDPS) segment. These adjustments stem from a programming error in LIFO calculation, an understatement of rebate billings to a vendor, and a correction in revenue recognition for distribution service fees on specific transaction types. The net impact of these operational adjustments is a reduction of $0.01 per diluted share from continuing operations excluding special items for both the quarter and the full fiscal year. More significantly for investors, the filing discloses the commencement of settlement discussions with the Securities and Exchange Commission (SEC) regarding their ongoing investigation. In anticipation of a potential resolution, Cardinal Health has recorded a $25 million reserve for the fiscal year ended June 30, 2005. This SEC investigation, which began as an informal inquiry in October 2003 and led to prior financial restatements, also involves an inquiry from the U.S. Attorney for the Southern District of New York concerning revenue classification. Investors should note that the outcome of these investigations remains uncertain, and the reserved amount may not be sufficient, potentially requiring future adjustments or penalties.
Key Highlights
- 1Cardinal Health is amending its previously reported Q4 and full-year fiscal 2005 financial results due to accounting adjustments in its Pharmaceutical Distribution and Provider Services (PDPS) segment.
- 2Adjustments include an overstatement of LIFO credit ($15.9 million pre-tax), an understatement of vendor rebate billings ($4.9 million pre-tax), and a correction in revenue recognition for distribution service fees ($4.3 million pre-tax).
- 3The net impact of these operational adjustments reduces diluted EPS from continuing operations excluding special items by $0.01 for both the quarter and the full fiscal year.
- 4Cardinal Health has initiated settlement discussions with the SEC regarding its ongoing investigation.
- 5A reserve of $25 million has been established for the fiscal year ended June 30, 2005, in relation to the SEC investigation.
- 6The SEC investigation, which began in October 2003 and led to prior restatements, also involves an inquiry from the U.S. Attorney for the Southern District of New York.
- 7The outcome of the SEC and U.S. Attorney inquiries is uncertain, with potential for further restatements, fines, penalties, or other sanctions.