Not Better Late Than Never at Office Depot

If you're an investor in Office Depot (NYSE: ODP  ) , time is not on your side. On Monday, the big-box retailer said it would delay the release of its third-quarter earnings announcement, and more often than not in such a situation, later does not mean better.

Typically, these delays mean that eventually the company will come out with something Wall Street likes to call a "restatement of earnings." As much as you might hope for a nice surprise, that usually means the company over-reported its past financials -- and not just in the latest quarter. 

Pennies add up
Office Depot didn't give a new date for the third-quarter release, so investors might also want to start counting the days. The longer the delay, the worse the news. In fact, research suggests that when earnings are eventually released, the decline usually amounts to about a penny per share a day. Office Depot's earnings over the past 12 months were $1.90 per share. So if you're still waiting a month from now, count on earnings of $1.60 per share or less.

The company said the delay was related to an independent review by its audit committee, which is taking a look at how so-called vendor program funds were accounted for. Vendor funds are payments that suppliers make to retailers to ensure prominent placement of a product, to compensate for discounted prices, or to pay for other merchandising activities. These payments are completely legal.

But accounting for these funds has been problematic. According to a CFO Magazine article, companies such as CVS Caremark (NYSE: CVS  ) , Staples (Nasdaq: SPLS  ) , Kroger (NYSE: KR  ) , and BJ's Wholesale Club (NYSE: BJ  ) have reportedly run into similar trouble with the Securities and Exchange Commission in years past. Staples took a $62 million writedown related to this problem in 2003.

All this is yet another reminder that companies sometimes use ambiguity in the accounting rules to make their net income look better than it is. That's one reason why some Fools like companies that pay dividends -- no accounting trick in the world can put cold, hard cash in your pocket. Dividends keep companies honest. In the meantime, Office Depot shareholders have a tough wait ahead of them.

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