M&A Triggers Accounting Issues at Three Firms

Alliance One, Schering-Plough, and Darden Restaurants all say they're adjusting numbers in the wake of deals.
Stephen TaubFebruary 12, 2008

Merge-and-acquisition activity led three companies to announce accounting adjustments, and in one case a restatement.

Alliance One International Inc. said it would revise its financial statements for the quarter ended last Sept. 30 to reflect $6.9 million of restructuring and asset-impairment charges related to the sale of Compania General de Tabacos de Filipinas S.A. and its worldwide operating subsidiaries. “These impairment charges should have been booked in the second quarter financial statements but were erroneously included as a subsequent event,” the tobacco company stated in a regulatory filing.

The company noted also that management, after consulting with the audit committee, concluded that these errors constituted a material weakness in the company’s internal controls over financial reporting.

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Also, health-care concern Schering-Plough and Darden Restaurants said that they had taken purchase-accounting charges in the most recent quarter.

At Schering-Plough, purchase-accounting adjustments in the fourth quarter of 2007 contributed to its reporting of a quarterly net loss of $3.4 billion, or $2.08 per share. The drug maker noted that EPS for the quarter would have been 27 cents without purchase-accounting adjustments and acquisition-related items for its acquisition of Organon BioSciences, which closed last Nov. 19, as well as other items.

For its part, Darden warned that integration costs and purchase-accounting adjustments related to its acquisition of RARE Hospitality International Inc. will adversely affect diluted net earnings per share for the fiscal third quarter ending February 24 by approximately five cents.

In October, Darden, which owns more than 1,400 restaurants, including the Red Lobster and Olive Garden, completed the purchase of Rare, which owns and franchises 292 LongHorn and 29 Capital Grille restaurants.