Merrill Lynch to Restate Cash Flows After Error

Merrill Lynch, the world's largest full-service brokerage, said on Monday it was restating its cash flow statements for 2005, 2006 and the first three quarters of 2007 after finding an error.

Merrill Lynch
Merrill Lynch

In a filing with the U.S. Securities and Exchange Commission, the New York-based company said it overstated cash provided by derivatives financing transactions, a financing activity, but that this was offset by an overstatement of cash used for trading liabilities, an operating activity.

Merrill Lynch said that investors should not rely on its previous financial statements for the affected periods because of the error, but that the error did not affect revenue, net income, earnings per share, regulatory capital and several other measures.

Separately, Merrill Lynch said in its annual report that challenging market conditions at year end have continued in 2008, "driven largely by significant weakness in the U.S. and European credit markets, which we expect to persist in the near term with continued asset repricing and valuation pressures across multiple asset classes."

The company said this may hurt the value of its exposures to collateralized debt obligations, subprime mortgage-related assets and other residential and commercial real estate-related loans and securities, "which could result in additional write-downs."

Merrill Lynch lost $7.78 billion, or $9.69 per share, hurt by write-downs for CDOs and subprime-related assets. That compared with a profit of $7.5 billion, or $7.59 per share, a year earlier. The New York-based company's net loss from continuing operations was $8.64 billion, compared with a year-earlier $7.1 billion profit.