UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest reported) January 25, 2002
------------------------------------
Hudson Respiratory Care Inc.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
California 333-56097 95-1867330
- ---------------------------- ------------------------ ---------------------------------
(State or other jurisdiction (Commission File Number) (IRS Employer Identification No.)
of incorporation)
27711 Diaz Road, P.O. Box 9020, Temecula, CA 92589
- --------------------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (909) 676-5611
-----------------------------
Not applicable
- --------------------------------------------------------------------------------
(Former name or former address, if changed since last report.)
Item 4. Changes in Registrant's Certifying Accountant.
(a) Previous Independent Accountant
On January 25, 2002, Hudson Respiratory Care Inc. (the "Company")
dismissed Arthur Andersen LLP ("Andersen") as its independent accountant.
Andersen provided both accounting and audit services to the Company, and was the
primary consultant for the implementation of the Company's SAP software
platform.
The reports of Andersen on the Company's financial statements for the
past two fiscal years contained no adverse opinion or disclaimer of opinion and
were not qualified or modified as to uncertainty, audit scope or accounting
principles.
The Company's Board of Directors approved the decision to change
accountants on January 17, 2002, and the Audit Committee of the Board of
Directors approved the decision to change accountants on January 25, 2002. The
Board of Directors believes that it is in the best interests of the Company to
make a change in the Company's certifying accountants.
In connection with its audits for the two most recent fiscal years and
through January 25, 2002, there have been no disagreements with Andersen on any
matter of accounting principles or practices, financial statement disclosure, or
auditing scope or procedure, which disagreements, if not resolved to the
satisfaction of Andersen, would have caused Andersen to make reference thereto
in its report on the financial statements of the Company for such time periods,
except as follows:
. During the audit of its financial statements for the year ended
December 31, 2000, the Company had a disagreement with Andersen
regarding the reserves for accounts receivable (doubtful accounts
and rebates) as of December 31, 2000. Andersen informed the
Company of its concerns as to the methodology utilized to
establish the level of these reserves as well as that inadequate
support had been provided for these reserves. Upon further review
and analysis by the Company, and continuing discussions with
Andersen, these reserves were adjusted, and backup substantiation
developed, to the satisfaction of Andersen, which issued its
report on the Company's financial statements for the year ended
December 31, 2000.
Members of the Audit Committee of the Board of Directors of the
Company met with Andersen to discuss these matters. The Company believes that
the concerns expressed by Andersen with respect to the foregoing issue have been
addressed, as evidenced by the fact that Andersen has issued an unqualified
report covering the Company's 2000 financial statements, and that the Company
now has policies and procedures in place to properly establish reserve balances,
and substantiation, in respect of its accounts receivable in accordance with
GAAP. The Company has authorized Andersen to respond fully to the inquiries of
the successor accountant concerning this matter.
During the two most recent fiscal years and through January 25, 2002,
except as described below, there have been no reportable events as defined in
Item 304(a)(1)(v) of Regulation S-K. Andersen informed the Company in a letter
dated July 30, 2001 that the following material weaknesses in internal control
existed during fiscal year ended December 31, 2000:
. The Company did not prepare on a timely basis reconciliations for
substantially all of the Company's balance sheet accounts, and
the Company's internal process for review and approval of
reconciliations was informal and inconsistent.
. The Company's support for the required reserves for accounts
receivable (doubtful accounts and rebates) was initially
inadequate; upon further review, adjustments required to properly
state such reserves as of December 31, 2000 were material to the
Company's consolidated financial statements.
. The Company's consolidated financial statements were not prepared
on a timely basis and eliminating entries were not initially
well-supported.
. The Company had a shortage of accounting and finance personnel,
and had retained accounting and finance personnel who lacked the
appropriate expertise; as a result, the Company's former Chief
Financial Officer was responsible for a disproportionate amount
of the Company's financial reporting process, and the efficiency,
timeliness and accuracy of the Company's financial reporting was
adversely impacted.
Members of the Audit Committee of the Board of Directors of the
Company discussed these matters with Andersen. Except as described above, these
conditions did not result in any disagreements or differences in opinion between
the Company and Andersen. Andersen advised the Company in the July 30, 2001
letter that it understood that the Company had taken certain steps subsequent to
December 31, 2000 to mitigate these material weakness conditions. The Company
has authorized Andersen to respond fully to the inquiries of the successor
accountant concerning these matters.
The Company has provided Andersen with a copy of the disclosures made
by the Company in this report and has requested that Andersen furnish the
Company with a letter addressed to the SEC stating whether or not Andersen
agrees with the above statements, and if not, stating the respects in which it
does not agree. A copy of such letter is attached hereto as Exhibit 16 and is
incorporated herein by reference.
(b) New Independent Accountant
On February 1, 2002, the Company engaged Deloitte & Touche LLP
("Deloitte") as the Company's new principal independent accountant to audit the
Company's financial statements, to replace Andersen. During the two most recent
fiscal years and through February 1, 2002, the Company has not consulted with
Deloitte regarding either (i) the application of accounting principles to a
specified transaction, either completed or proposed; or the type of audit
opinion that might be rendered on the Company's financial statements; or (ii)
any matter that was either the subject of a disagreement (as that term is
defined in Item 304(a)(1)(iv) of Regulation S-K and the related instructions to
Item 304 of Regulation S-K), or a reportable event (as described in Item
304(a)(1)(v) of Regulation S-K). The Company has authorized Andersen to respond
fully to any inquiries by Deloitte relating to its engagement as the Company's
independent accountant.
Item 7. Financial Statements and Exhibits.
(c) Exhibits.
16. Letter from Arthur Andersen regarding Change in Certifying
Accountant.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Company has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
HUDSON RESPIRATORY CARE INC.,
a California corporation
------------------------------
(Registrant)
Date February 1, 2002 /s/ Patrick G. Yount
------------------------ ------------------------------
(Signature)*
By: Patrick G. Yount
Chief Financial Officer
*Print name and title of the signing officer under his signature.
EXHIBIT INDEX
Exhibit No. Description
16 Letter from Arthur Andersen regarding Change in Certifying
Accountant, dated January 31, 2002.