Accounting & Tax

Down the Dial: Radio One Restates Over Options

Stock-option and state tax accounting cause static for the nation's seventh-largest broadcaster.
Stephen TaubJune 15, 2007

Radio One has restated its financials, mostly as a result of incorrect stock-option calculations. The company, reportedly the nation’s seventh-largest radio broadcasting company based on 2006 net broadcast revenue, says it reduced earnings by about $10.1 million from 1999 through 2005.

The stock-based compensation charges, including the tax effect and other adjustments, decreased net income by about $9 million for the restatement period. Earlier this year, Radio One disclosed that the Securities and Exchange Commission had launched an informal inquiry into the company’s stock-option granting practices.

In its delayed filing of its 2006 results, Radio One also said that, in addition to the adjustments related to the stock-option review, it is restating its financial statements to correct an accounting error for the year ended December 31, 2005.

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That correction relates to a change in methodology in determining the carry forward of prior year net operating losses for state tax purposes. The company added that in connection with the change in methodology, an error was made in calculating the net operating losses for certain states for 2005.

The impact on the financial statements for 2005 is an additional deferred-tax expense of about $1.1 million. Radio One said the correction was recorded in the three months ended December 31, 2005, and did not have a material impact on 2005 quarterly or annual results.

In addition, the stock-based compensation charges, including the tax effect and other adjustments related to the restatement, increased the net loss for 2006 by $246,000.

Radio One also said it will not be able to file its quarterly report for the period ended March 31, 2007, on time because it has not completed the restatement.