Cardinal Health Inc., overseen by Ohio Board of Trustees Chairman Robert D. Walter, is under investigation by the Securities and Exchange Commission concerning the company's accounting practices.
The commission has subpoenaed company documents and said news, coupled with disappointing profit forecasts for the remainder of the year, led to a sharp drop in Cardinal Health's stock. It plunged $17.33, or roughly 25 percent, from $70.05 to $52.72 last Wednesday, and has held steady at around $52 the past week.
The investigation stems from the accounting of $22 million expected as part of an antitrust suit. Questions as to how Cardinal classifies revenues from drug distribution are also part of the commission's query.
Fourth quarter profit increases are now expected to be 11 percent, as opposed to an earlier projection of 15 percent.
During an investor's conference call last Wednesday, Walter said underachievement on management's part had much to do with the disappointing forecasts. He stressed, however, that Cardinal could turn the situation around in a timely fashion.
This is not the first time parts of Cardinal have underperformed or failed to execute
so we know how to fix things that need fixing but this is certainly the most visible example of lack of execution Walter said during the conference call.
Cardinal Health, with sales of more than $56 billion per year, is Ohio's largest company. Based in Dublin, it is a major pharmaceuticals wholesaler, and is listed at No. 17 on the Fortune 500, an annual listing of America's largest and most successful companies by revenue.
A message left to Cardinal Health media relations was not immediately returned. The company previously has declined to comment to reporters about ongoing litigation.
David Lusty, a local financial consultant, said that Cardinal Health's sharp decline was the result of the double whammy of SEC investigation and declining profit projections, but that the projections likely had a bit more to do with the quick sale of stocks than the investigation.
Even without the probe
(the stock) would have went down
Lusty said.
Despite the news, Lusty said if he owned Cardinal Health stock, he would keep it, and added that this situation could allow a daring investor to make a quick profit when and if the company bounces back.
Historically
(Cardinal Health has) been a great company
Lusty said. This isn't an Enron.
-The Columbus Dispatch contributed to this article
17
Archives
Kyle Kondik
