Form 8-K 030105





UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): February 25, 2005


Talk America Holdings, Inc.
(Exact name of registrant as specified in its charter)

Delaware
(State of incorporation)
000-26728
(Commission File Number)
23-2827736
(I.R.S. Employer Identification No.)

12020 Sunrise Valley Drive, Suite 250, Reston, Virginia
(Address of principal executive offices)
20191
(Zip Code)

(703) 391-7500
(Registrant's telephone number, including area code)

N/A
(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))


 
ITEM 2.02. RESULTS OF OPERATIONS AND FINANCIAL CONDITION.

On March 1, 2005, Talk America Holdings, Inc. (the “Company”) issued a release announcing its financial results for the fourth quarter and year ended December 31, 2004. A copy of the release is attached as Exhibit 99.1.

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ITEM 4.02. NON-RELIANCE ON PREVIOUSLY ISSUED FINANCIAL STATEMENTS OR A RELATED AUDIT REPORT OR COMPLETED INTERIM REVIEW.

(a)     On February 16, 2005, the Company announced that it was reviewing its accounting for certain items and that it was in the process of determining whether some of them should have been recorded in earlier periods. On February 25, 2005, the Company’s Audit Committee, after discussion with Company management and consultation with the Company’s independent registered public accounting firm, concluded that the previously issued financial statements of the Company for the fiscal quarters in 2003, for the fiscal year ended December 31, 2003 and for the fiscal quarters ended March 31, June 30 and September 30, 2004 should not be relied upon because of items requiring correction in those financial statements, and approved management’s recommendation that the Company’s financial statements included in its Annual Report on Form 10-K, as previously amended by its Form 10-K/A, for the year ended December 31, 2003 and in its Quarterly Reports on Form 10-Q for the quarters ended March 31, June 30 and September 30 in 2003 and 2004 should be restated to make the necessary accounting corrections. Accordingly, the financial statements in the Company reports filed with the Securities and Exchange Commission covering the periods noted should not be relied upon until restatements of such financial statements are filed with the Securities and Exchange Commission.

In the course of the Company’s year-end closing process and in considering certain comments that the Company received from the Securities and Exchange Commission in respect of its 2003 Form 10-K Report and its 2004 Form 10-Q Quarterly Reports, the Company’s management determined that the Company should correct its accounting for certain items, as described below:

·  
Correcting for the impact of state tax matters, recorded in 2004, not accounted for in 2003, which understated the 2003 tax benefit and deferred tax assets.
 
·  
The recognition of the deferred tax assets and corresponding reduction of goodwill beginning in the quarter ended September 30, 2003, related to net operating losses acquired as part or our acquisition of Access One.
 
·  
Certain customer fee revenue earned in 2003 and 2004 that was misclassified as a liability should have been recorded as revenue in our reported financial information for those periods.
 
·  
In calculating the number of fully diluted shares and the Company’s diluted net income per share in its reported financial information for the quarters ended September 30, 2003 and December 31, 2003, and full year 2003 and the first three quarters of 2004, the Company excluded the deferred tax benefit of option exercises and, accordingly, overstated the number of fully diluted shares outstanding.
 
2
 
The following table summarizes the effect of the anticipated adjustments described above on the Company’s previously reported net revenue, net income and fully diluted earnings per share.
 
(in 000s, except per share data) (Unaudited)
  
2003
  
2004
  
   
Q1
  
Q2
  
Q3
  
Q4
  
Year
  
Q1
  
Q2
  
Q3
  
Revenues:
                                                  
  Reported
  
$
87,843
  
$
93,748
  
$
99,929
  
$
101,143
  
$
382,663
  
$
109,321
  
$
114,881
  
$
120,537
  
  As Restated
    
88,202
    
93,906
    
100,178
    
101,407
    
383,693
    
109,619
    
115,213
    
120,929
  
                                                   
Operating Income:
                                                  
  Reported
  
$
15,179
  
$
19,027
  
$
17,620
  
$
13,432
  
$
65,258
  
$
14,103
  
$
13,973
  
$
13,864
  
  As Restated
    
15,538
    
19,185
    
17,869
    
13,696
    
66,288
    
14,401
    
14,305
    
14,256
  
                                                   
Pre-Tax Income:
                                                  
  Reported
  
$
14,961
  
$
17,500
  
$
16,106
  
$
12,197
  
$
60,764
  
$
13,387
  
$
13,573
  
$
14,486
  
  As Restated
    
15,319
    
17,658
    
16,355
    
12,461
    
61,793
    
13,685
    
13,905
    
14,878
  
                                                   
Net Income:
                                                  
  Reported
  
$
9,126
  
$
10,675
  
$
51,566
  
$
7,094
  
$
78,461
  
$
8,356
  
$
8,548
  
$
9,147
  
  As Restated
    
9,343
    
10,771
    
54,102
    
7,601
    
81,817
    
8,288
    
8,422
    
9,011
  
                                                   
Fully Diluted EPS:
                                                  
  Reported
  
$
0.32
  
$
0.37
  
$
1.74
  
$
0.25
  
$
2.75
  
$
0.29
  
$
0.30
  
$
0.32
  
  As Restated
    
0.32
    
0.37
    
1.88
    
0.27
    
2.94
    
0.29
    
0.30
    
0.32
  
                                                   
Fully Diluted Shares:
                                                  
  Reported
    
29,940
    
29,562
   
29,761
    
28,884
    
28,514
    
28,862
    
28,694
    
28,212
  
  As Restated
    
29,940
    
29,570
    
28,877
    
28,107
    
27,806
    
28,130
    
28,039
    
27,737
  

With the exception of the deferred tax assets recorded in connection with the Access One acquisition, these changes are immaterial to the Company’s balance sheet and cash flow statements for the periods proposed to be restated.

The decision to restate prior financial statements as discussed above was made by the Company’s Audit Committee, upon the recommendation of the Company’s management and with the concurrence of the Company’s independent registered public accounting firm, PricewaterhouseCoopers LLP. The Company’s Audit Committee has discussed the matters related to the restatements disclosed in this Current Report with its independent registered public accounting firm.

The Company’s management continues to review its internal controls over financial reporting and whether the facts and circumstances underlying the accounting corrections reflected in the restatements constitute “material weaknesses” as defined by the Public Company Accounting Oversight Board’s Auditing Standard No. 2. The fact that the Company will restate its financial statements, as described above, indicates “material weaknesses” as defined by these standards.

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ITEM 9.01. FINANCIAL STATEMENTS AND EXHIBITS.

(c)     Exhibits

99.1  
Release dated March 1, 2005.


SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.


 
 
 
Date: March 1, 2005
TALK AMERICA HOLDINGS, INC.
 
 
By: /s/ Aloysius T. Lawn IV
Name: Aloysius T. Lawn IV
Title: Executive Vice President - General
   Counsel and Secretary



EXHIBIT INDEX

  Exhibit Number  Description

99.1                                 
Release dated March 1, 2005.