Office Depot Inc. said it would restate its 2010 results, after the U.S. Internal Revenue Service said the second-largest U.S. office supply chain could not carry back certain tax losses from prior years.
The company also said Thursday it expects first-quarter sales to be consistent with its prior outlook of a 3 percent decline from the first quarter of 2010, and that first-quarter EBIT (earnings before interest and taxes) would be off 50 percent. Office Depot shares fell 9.3 percent after hours.
Office Depot expects the ruling would result in changing its prior full-year net earnings of $33 million to a net loss of $46 million, as its 2010 tax benefits are reduced by about $80 million.
It also will increase the 2010 net loss attributable to common shareholders to $82 million, or 30 cents per share, from $2 million, or 1 cent per share.
"While we are disappointed to have to restate our 2010 financial results, it's important to note that this restatement has no impact on our previously reported 2010 EBIT or EBITDA (earnings before interest, taxes, depreciation and amortization) and no net impact on 2010 cash flows," Chief Financial Officer Mike Newman said in a statement.
However, the restatement will impact first-quarter 2011 operating cash flow, Office Depot said.
A $63 million current tax receivable related to the carry back would be removed from its balance sheet and hurt 2011 operating cash flow, it added.
The company expects to file the restated financial statements on or about April 6.
For the first quarter, Office Depot estimated a drop of about 50 percent in EBIT from a year earlier due to lower sales, higher marketing costs, business improvements, and higher product costs in the International Division. It also cited increased spending to add services and winter weather-related disruptions in January and February.
The Boca Raton, Florida-based retailer said first-quarter sales for North American stores open at least a year fell 1 percent from the year-ago period. Sales declined 3 percent for its North American Business Solution Division, and dropped 5 percent in constant currency terms for its International Division.
In after-hours trade, Office Depot shares traded at $4.20, down 9.3 percent from their close of $4.63 on the New York Stock Exchange.
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