Talk America Holdings Inc. of Reston said yesterday that it will delay announcing its fourth-quarter financial results and may have to restate results for previous quarters because of accounting questions.
The changes are not expected to significantly affect revenue or income and were uncovered in a review by Talk America's outside auditor, PricewaterhouseCoopers, said Jeff Schwartz, the company's investor relations representative. The company, which sells local and long-distance phone service, said it has postponed its earnings conference from today to March 1.
"The ultimate resolution of these items may indicate material weaknesses in our internal controls," the company said in a statement filed with the Securities and Exchange Commission.
"This is not at all uncommon" among public companies because of the greater accounting scrutiny applied under the Sarbanes-Oxley Act, which strengthened corporate-governance responsibilities, said Charles M. Elson, director of the Weinberg Center for Corporate Governance at the University of Delaware. "The climate now, after Sarbanes-Oxley, is a lot more detail-oriented. The closer you look at something, the more flaws you're likely to find."
Talk America said its main concerns are its accounting for deferred tax assets and whether such assets should have been accounted for during 2003 or in the first three quarters of 2004. The company also said it has been collecting customer fees that have not been recorded as revenue. And it said it is reviewing whether it properly accounted for tax benefits associated with its unexercised stock options, which could change Talk America's number of diluted shares.
Talk America sells service in 11 states and had 671,000 customers at the end of its third quarter. The company pulled back its marketing -- it advertises only in Michigan -- after a key ruling at the Federal Communications Commission that will end the discounts Talk America and other companies receive in leasing lines from the big regional phone companies.
