It’s been a while since I noticed one of these…
It’s another cash flow statement restatement, this time by Strategic Hotels Capital Inc (NYSE:BEE). Their non-reliance 8-K spells out the issue: a misclassification between “operating” cash flows and “investing” cash flows.
This one is actually favorable, however, if you take “favorable” as meaning a change that improves the cash flow from operations. Seems that the firm had been classifying expenditures for escrow deposits and investments in notes receivable as operating cash flows; being uses of cash, they reduced operating cash flows. Correctly classified, they would have been investing cash flows. An excerpt from the 8-K:
For the year ended December 31, 2005, management determined that $40,102,000 of cash spent for escrow deposits and purchased notes receivable relating to hotel and land acquisitions should have been reported as “net cash used in investing activities” rather than as a reduction of “net cash provided by operating activities.” For the quarter ended March 31, 2005, management similarly concluded that $8,000,000 of cash spent for escrow deposits related to a hotel acquisition should have been reported as “net cash used in investing activities” rather than as a reduction of “net cash provided by operating activities”.
For the year ended December 31, 2004, management concluded that $4,900,000 pertaining to investments in our hotels and issuance of a note receivable should be reported as a reduction of “net cash provided by investing activities” rather than “net cash used in operating activities.”
Rather a fortuitous restatement. Like finding a $20 bill in your jeans pocket, times a few million.