The denial by the IRS to allow Office Depot Inc. (NYSE:ODP) to use specific tax credits for 2010 and 2011 has the share price of the stock plunging by over 11 percent. At one point the share price had fallen by just under 15 percent.
As a result, free cash flow in the quarter just ended was negative by $100 million, according to Chief Financial Officer Mike Newman.
According to the IRS, the company didn't qualify for tax credits under the American Recovery and Reinvestment Act of 2009 because some tax rules superseded those Office Depot was using to determine its eligibility. Another reason the tax system needs to be simplified and taxes lowered all the way around.
The retailer had believed they qualified for $80 million in tax credits for 2010 and $63 million for 2011.
Office Depot said they'll still be able to end up with positive free cash flow in 2011 because of a special dividend they will extract from its division in Mexico.
The company was trading at $4.11, falling $0.52, or 11.23 percent, as of 2:01 PM EDT.
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