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|Interpublic Announces First Quarter 2010 Results|
"We were pleased to see another quarter of significant sequential improvement in our organic revenue performance, which supports our belief that the economy is recovering and that we'll keep seeing progress in our business as we move through this year," said Michael I. Roth, Interpublic's Chairman and CEO. " Across the full range of marketing disciplines, we are seeing our agencies perform well and increasingly deliver integrated client solutions based on deep consumer insights that incorporate traditional and digital media channels. Operating performance in the first quarter also continued to reflect our disciplined cost management. We are on track to meet our goal of resuming aggressive margin expansion and we have the talent and the tools to continue to benefit from an economic recovery. With our augmented credit facility and the tender for preferred shares that we announced today, we are taking steps to add to the company's financial strength and flexibility, as well as to further enhance shareholder value in 2010 and in the years to come."
Revenue of $1.34 billion in the first quarter of 2010 was up 1.2% compared with the same period in 2009. During the quarter, the effect of foreign currency translation was positive 4.2%, the impact of net divestitures was negative 0.1% and the resulting organic decrease in revenue was 2.9%.
During the first quarter of 2010, salaries and related expenses were $979.3 million, down 1.7% compared to the same period in 2009. After adjusting for currency effects and the impact of net divestitures, salaries and related expenses decreased 5.7% organically. Staff cost ratio, which is total salaries and related expenses as a percentage of total revenue, decreased to 73.0% in the first quarter of 2010 from 75.2% for the comparable prior-year period.
Severance expense recorded in the first quarter of 2010 was $10.3 million, compared to $41.6 million in the first quarter of 2009.
During the first quarter of 2010, office and general expenses were $421.1 million, up 2.5% compared to the same period in 2009. After adjusting for currency effects and the impact of net divestitures, office and general expenses decreased 2.4% organically. Office and general expenses in the first quarter of 2010 include $5 million for the transition to inflationary accounting for operations in Venezuela.
Non-Operating Results and Tax
Net cash interest expense increased $3.9 million, or 16.9%, in the first quarter of 2010 compared to the same period in 2009.
Other income, net was $0.5 million for the first quarter of 2010.
The income tax benefit in the first quarter of 2010 was $15.3 million on loss before income taxes of $85.0 million, compared to a benefit of $25.4 million on loss before income taxes of $99.5 million in the same period in 2009. The effective tax rate for the first quarter of 2010 was 18.0%, compared to 25.5% for the same period a year ago.
At March 31, 2010, cash, cash equivalents and marketable securities totaled $1.94 billion, compared to $2.51 billion at the end of 2009 and $1.66 billion at the end of the first quarter of 2009. Total debt of $1.94 billion as of March 31, 2010 compared to $1.95 billion at the end of 2009 and $2.11 billion as of March 31, 2009.
On April 29, 2010, the company launched a tender offer to repurchase up to 370,000 shares of its Series B preferred stock, convertible into approximately 27.1 million common shares, for an aggregate purchase price of up to $400 million. The company currently pays annual dividends of approximately $19.4 million on these preferred shares.
Amended Credit Facility
On April 23, 2010, the company amended its existing three-year committed credit agreement to increase the commitments of the lenders from $335.0 million to $650.0 million. The amended credit agreement expires July 18, 2013.
For more information concerning the company's financial results, please refer to the accompanying slide presentation available on our website, http://www.interpublic.com.
Interpublic is one of the world's leading organizations of advertising agencies and marketing services companies. Major global brands include Draftfcb, FutureBrand, GolinHarris International, Initiative, Jack Morton Worldwide, Lowe Worldwide, Magna, McCann Erickson, Momentum, MRM Worldwide, Octagon, UM and Weber Shandwick. Leading domestic brands include Campbell-Ewald; Campbell Mithun; Carmichael Lynch; Deutsch, a Lowe & Partners Company; Hill Holliday; ID Media; Mullen; The Martin Agency and R/GA. For more information, please visit http://www.interpublic.com.
This release contains forward-looking statements. Statements in this release that are not historical facts, including statements about management's beliefs and expectations, constitute forward-looking statements. These statements are based on current plans, estimates and projections, and are subject to change based on a number of factors, including those outlined under Item 1A, Risk Factors, in our most recent Annual Report on Form 10-K. Forward-looking statements speak only as of the date they are made, and we undertake no obligation to update publicly any of them in light of new information or future events.
Forward-looking statements involve inherent risks and uncertainties. A number of important factors could cause actual results to differ materially from those contained in any forward-looking statement. Such factors include, but are not limited to, the following:
Investors should carefully consider these factors and the additional risk factors outlined in more detail under Item 1A, Risk Factors, in our most recent Annual Report on Form 10-K.