SunLink Health Systems, Inc. today announced that it expects its quarterly reports on Form 10-Q for the quarters ended September 30, 2008, December 31, 2008 and March 31, 2009, to be restated due to the impact of non-cash accounting errors at the Company’s Carmichael’s Cashway Pharmacy, Inc. subsidiary.
In connection with an internal investigation by management, including the results of an investigation by an outside accountant retained by the Company, into unresolved accounting discrepancies between Carmichael’s accounts receivable detail and its general ledger and based on information presented by management and such accountant and discussions with the Company’s independent registered public accounting firm, management and the Audit Committee of SunLink determined that Carmichael’s financial statements contained errors that, in turn, resulted in errors in SunLink’s financial statements for the periods indicated. As a result, the Company has concluded that SunLink’s financial statements included in the Quarterly Reports on Form 10-Q for the periods indicated should be restated and that investors should not rely upon such financial statements without taking into account the anticipated and potential adjustments described in this press release.
The errors identified primarily include errors in the amount of net income (loss), bad debt expense, allowance for doubtful accounts and contractual allowances of Carmichael’s and, hence, SunLink. The Company believes, based on currently available information, that the impact of adjustments for these non-cash errors will be to decrease net earnings (loss) for the nine months ended March 31, 2009 by a currently estimated $1.06 million. The impact on reported net earnings (loss) is attributable to a net overstatement of receivables and unreconciled differences not adjusted for on Carmichael’s general ledger which are expected to aggregate approximately $1.7 million with an anticipated aggregate after tax effect of $1.06 million. The restatement of SunLink’s quarterly results for each of the quarters in the fiscal year is expected to result in: