Radiopharmaceutical firm Syncor International reported yesterday that "questionable payments" made by one of its overseas subsidiaries to customers in Taiwan exceeded $500,000 over the past five years. Revelations regarding the payments have sparked shareholder suits against the company and have raised questions about whether the Woodland Hills, CA, firm can complete a proposed deal to be acquired by Cardinal Health.
A special committee of Syncor's board of directors, along with outside counsel and an independent forensic accounting firm, released information on the details of the payments, which Syncor first announced earlier this month. In addition to the Taiwan payments, the committee discovered questionable payments and other transactions at Syncor operations in at least six other countries in Asia, Latin America, and Europe. Some or all of these payments appear to have violated U.S. law, Syncor said.
The committee has also identified additional instances where activities of Syncor or of its subsidiaries or representatives may have "constituted violations of local laws and regulations relating to, among other things, tax, competition, and regulatory matters."
The investigation is ongoing, but based on currently available information, Syncor said it does not expect that the payments, transactions, or other matters will be material to its financial results or require an adjustment or restatement of past financial statements.
Syncor said it has also been fully cooperating with the SEC and the U.S. Department of Justice regarding the revelations. The firm is in "advanced" discussions with SEC staff and the DOJ.
With respect to the Cardinal Health deal, Syncor said it believes that the information it has learned would not result in failure to satisfy conditions for the deal. However, no definitive determination can be made until the investigation has been completed and discussions with the DOJ and SEC resolved, Syncor said.
Syncor was hit with a raft of shareholder lawsuits this week that could potentially complicate the consummation of the deal. The suits charge Syncor with issuing "material misrepresentations" that inflated the company’s stock price by not disclosing the payments. Syncor shares closed at $24.20 on November 20, a decline of 33% compared with a closing price of $35.92 on November 5, the day before the questionable payments were announced.
However, financial results released yesterday were a silver lining for the company. For its third quarter (end-September 30), the Woodland Hills, CA-based firm had net sales from continuing operations of $192.2 million, up 28.3% compared with the $149.8 million posted in the third-quarter of 2001. Thanks to improved pricing and volume increases, Syncor realized a 22.3% gain in sales of the Cardiolite imaging agent.
Syncor had third-quarter operating income of $23.9 million, compared with $15.6 million in the same period last year. The firm posted a special charge to earnings net after-tax of $31.3 million, an asset-impairment charge related to its discontinued Comprehensive Medical Imaging business.
By AuntMinnie.com staff writersNovember 21, 2002
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Waiting period for Cardinal Health/Syncor deal expires, August 1, 2002
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