Popular filed a non-reliance 8-K yesterday for the purpose of warning investors not to use the cash flow statements in its 10-Qs filed in 2005. Reason?
…disbursements on mortgage loans originated or acquired by Popular Financial Holdings, Inc., our U.S. mortgage and consumer lending subsidiary, with the intent to sell in the secondary market or securitize in transactions structured as sales, were incorrectly presented as cash flows related with investing activities, instead of operating activities, which is the presentation required by SFAS No. 102 “Statement of Cash Flows — Exemption of Certain Enterprises and Classification of Cash Flows from Certain Securities Acquired for Resale.
The filing went on to indicate that the correction has been made for the full year in the 2005 10-K filing, with information on the correct presentation for each interim period included in the filing. Expect to see the correction show in the 2006 10-Qs, but don’t expect discrete restated filings for each 2005 10-Q before then.
The effect of moving those disbursments into operations and out of financing made quite a difference in Popular’s cash flows, as shown in the 10-K. In the first quarter, cash from operations dropped from $887 million to a negative $240 million; in the second quarter YTD figures, a drop from $2.359 billion to $545 million; third quarter YTD, from $2.765 billion to $393 million.
Too early to tell for sure, but “cash flow statement restatements