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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
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Current Report Pursuant to Section 13 or 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report Commission file number
February 27, 2001 1-6686
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THE INTERPUBLIC GROUP OF COMPANIES, INC.
(Exact name of registrant as specified in its charter)
Delaware 13-1024020
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1271 Avenue of the Americas, New York, New York 10020
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212) 399-8000
Item 5. Other Events.
A press release issued by The Interpublic Group of Companies, Inc.
("Interpublic") with respect to its results for the fourth quarter and full year
2000 is attached as Exhibits 99.1 incorporated herein by reference.
This document contains forward-looking statements. Statements that are not
historical facts, including statements about Interpublic's beliefs and
expectations, are forward-looking statements. These statements are based on
current plans, estimates and projections, and therefore you should not place
undue reliance on them. Forward-looking statements speak only as of the date
they are made, and Interpublic undertakes no obligation to update publicly any
of them in light of new information or future events.
Forward-looking statements involve inherent risks and uncertainties.
Interpublic cautions you that 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, those associated with
the effect of national and regional economic conditions, the ability of
Interpublic to attract new clients and retain existing clients, the financial
success of the clients of Interpublic, and developments from changes in the
regulatory and legal environment for advertising companies around the world.
Exhibits.
99 Press Release dated February 27, 2001.
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.
THE INTERPUBLIC GROUP OF
COMPANIES, INC.
Date: February 27, 2001 By: /s/ Nicholas J. Camera
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Nicholas J. Camera
VICE PRESIDENT, GENERAL
COUNSEL AND SECRETARY
Exhibit 99
FOR IMMEDIATE RELEASE
INTERPUBLIC GROUP ANNOUNCES 31% GAIN IN
FOURTH QUARTER EPS BEFORE ACQUISITION COSTS
NEW YORK, NY (February 27, 2001)---The Interpublic Group of Companies announced
today that diluted earnings per share grew 31% in the fourth quarter to $.46
from a restated $.35 in 1999, before non-recurring items.
Worldwide revenues were 6% higher in the quarter at $1,601 million, compared to
$1,517 million in 1999. In constant dollars, revenues grew 11% in the quarter.
Domestic revenues advanced 10% to $820 million, reflecting good gains at
McCann-Erickson WorldGroup and specialized marketing services, partially offset
by a decline at Lowe Lintas. International revenues grew 11% in constant dollars
during the quarter. Reported international revenues grew 1% to $781 million as
negative currency translation in Europe tempered growth.
Net income advanced 35% to $144.8 million before non-recurring items, reflecting
strong margin performance driven by cost controls.
John J. Dooner, chairman and chief executive officer, commented: "Interpublic
delivered solid organic revenue growth and strong margin performance in the
fourth quarter, despite difficult comparisons at Lowe Lintas and Initiative
Media. Our challenge in 2001 will be to accelerate top-line growth across all
our businesses, while maintaining our focus on cost containment.
"Looking forward, we're confident our business can continue to produce
double-digit earnings gains, fueled primarily by organic growth. Our
reinvestment efforts will continue to focus on the expansion of existing
businesses, supplemented by accretive acquisitions."
Non-Recurring Items Affecting Comparability
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In both 1999 and 2000, non-recurring items affected the comparability of
results. In the fourth quarter of 2000, Interpublic acquired Deutsch, Inc. in a
pooling of interests transaction valued at $265 million. Consideration paid to
Donny Deutsch, the sole shareholder, was a capital transaction. The remaining
consideration includes shares issued to employees holding non-voting stock
rights, which was recognized as a one-time transaction cost of $44.7 million
($.13 per share).
As previously reported, in the fourth quarter of 1999 Interpublic undertook a
restructuring of Lowe Lintas, which was completed in the third quarter of 2000,
incurring cumulative pretax costs of $165.2 million or $.33 per share after
taxes over four quarters.
Discussion of results in this release excludes these non-recurring costs to
facilitate analysis of operating performance and trends.
Full Year Results
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Diluted earnings per share jumped 22% to $1.51 in 2000, compared to $1.24 in
1999. Net income grew 24% to $473.2 million, from $382.7 million in 1999.
Worldwide revenues grew 13% to $5,626 million in 2000, from $4,978 million in
1999, reflecting organic growth of 13%. In constant dollars, revenues grew 18%
in 2000. Domestic revenues gained 20% as strong new business trends and
acquisitions fueled growth. International revenues in constant dollars grew 15%,
reflecting strong gains at McCann-Erickson and specialized marketing services.
Due to the adverse effect of currency translation, reported international
revenues grew just 6%.
Income from operations of $833.5 million was more than 25% higher than the
year-earlier $662.7 million, and represented an operating profit margin of
14.8%.
Organic Growth
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Organic revenues, defined as revenues in constant dollars exclusive of
acquisitions, grew 9% in the fourth quarter. In the United States, organic
growth was 5%, reflecting unfavorable comparisons at Lowe Lintas and Initiative
Media. Internationally, organic revenues were 13% higher.
For the year, Interpublic posted organic growth of 13%, as domestic revenues
advanced 12% and international business gained 14%.
New Business
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Interpublic's agency systems gained net new business of approximately $484
million in the fourth quarter of 2000, up 64% compared to net new business of
$295 million in the fourth quarter of 1999. Major new accounts won during the
quarter included Verizon, Deutsche Bank, Princess Cruises and Tommy Hilfiger. In
addition, the company significantly expanded its long-term relationship with the
Coca-Cola Company.
During the latest 12 months, net new business totaled $2,560 million, including
assignments from Microsoft, Pfizer, 3Com, the US Navy, H&R Block, Merrill
Lynch/HSBC, Kohl's and H&M. In 1999, net new business was $1,839 million.
In 2001, new business wins accelerated, with Interpublic agencies gaining
several new accounts, including Virgin Mobile, Bestfoods, Mass Mutual, Revlon
and Marriott since the beginning of the year.
Revenue by Discipline
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Revenues generated by advertising were $829.9 million in the quarter, compared
to $841.9 million a year earlier, reflecting account losses at Lowe Lintas and
the negative impact of foreign currency translation. For the year, advertising
revenues grew 7% to $2.96 billion.
Revenues from specialized marketing services grew 14% and contributed 48% of
revenues in the fourth quarter, or $770.9 million, compared to $675.6 million or
45% of revenues in the fourth quarter of 1999. Each discipline contributed
higher revenues in the quarter:
Constant $
Fourth Quarter Revenues (Mils.) % Total % Change % Change
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Promotion, Event and Direct Marketing $376 24% 14% 17%
Public Relations $127 08% 31% 33%
Media Buying $097 06% 03% 07%
Marketing Intelligence $170 10% 11% 17%
For the year 2000, revenues from specialized marketing services gained 21% and
accounted for $2,662 million or 47% of revenues, compared to $2,208 million or
44% of revenues in 1999, as each discipline made a larger contribution.
Constant $
Year 2000 Revenues (Mils.) % Total % Change % Change
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Promotion, Event and Direct Marketing $1235 22% 31% 35%
Public Relations $0461 08% 34% 36%
Media Buying $0364 06% 06% 10%
Marketing Intelligence $0602 11% 05% 10%
Operating Income
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Income from operations advanced 35% in the quarter to $242.3, compared to 1999's
$179.5 million.
In 1999, results were impacted by a $21.7 million charge at NFO Worldwide,
relating to a discontinued business. Excluding these costs, income from
operations advanced 20% and the operating margin widened 180 basis points to
15.1%.
Other Income and Expense
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Interest expense increased to $34.3 million in the quarter from $21.6 million in
1999, reflecting higher borrowings and higher average rates.
Other non-operating income included $19 million of interest income and
approximately $11 million in pretax gains on the sale of assets. In the1999
quarter, pretax gains on asset sales contributed $27 million to non-operating
income.
For the year 2000, asset sales contributed $40 million to non-operating income;
in 1999, the company realized $49 million of gains for similar transactions.
Capital expenditures totaled approximately $200 million and the company
distributed $109 million in cash dividends to shareholders.
Taxes
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Interpublic's tax rate reflects the benefits of its ongoing global planning
initiatives and the positive effect of the Deutsch acquisition. For the year
2000, the effective tax rate was 39%, resulting in a 36% tax rate for the fourth
quarter. In 2001, the company anticipates that ongoing planning initiatives will
continue to favorably impact the effective tax rate. For the coming year, the
effective tax rate is expected to be between 40% and 41%.
Cash EPS
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Changes in accounting rules are expected to eliminate the impact of goodwill on
reported earnings in future periods, making cash EPS the standard measure of
performance.
Cash EPS is the sum of reported net income per share plus amortization of
intangibles. In the fourth quarter, cash EPS were $.55, compared to $.46 in
1999, representing an increase of 20%. Full year cash EPS totaled $1.81, up 20%
from $1.51 in the year earlier.
Outlook
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In 2001, growth in advertising expenditures is expected to moderate from recent
record rates in the face of slower economic activity and the absence of
political, dot.com and Olympics- related promotions. Demand for marketing
services is expected to remain relatively robust as clients continue to disperse
their promotional activities across an array of communications channels.
Interpublic expects revenue growth in 2001 to be a product of same account
growth, new business wins and acquisition activity. Because a high percentage of
operating costs is variable, the company has traditionally managed expenses to
optimize its profit at any level of revenue.
For 2001, the company is planning for double-digit earnings per share growth.
Revenue comparisons for advertising businesses are expected to remain difficult
through the first half of the year.
Webcast
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Management will discuss recent results on a webcast at 5:30 PM (EST). Investors
are invited to access the call live at www.interpublic.com or
www.streetfusion.com. The discussion will be archived at the company's website
for 45 days.
The Interpublic Group of Companies, Inc., is one of the largest organizations of
advertising agencies and marketing services companies. Its major worldwide
companies include McCann-Erickson WorldGroup, The Lowe Group, Draft Worldwide,
Initiative Media Worldwide, Octagon, NFO Worldwide and the Allied Communications
Group. The shares of Interpublic trade on the New York Stock Exchange (symbol:
IPG).
Safe Harbor Statement
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This release may discuss future performance. Comments made about expectations,
plans and prospects constitute forward-looking statements for purposes of the
safe harbor provisions of the Private Securities Litigation Reform Act. Actual
results may differ materially from those contemplated in any forward-looking
statements, and the company undertakes no obligation to update any such
statements. Risk factors are identified in the company's 1999 Form 10-K and more
recent 10-Qs on file at the Securities and Exchange Commission.
Contact: Susan V. Watson Sean F. Orr
(212) 399-8208 (212) 399-8093
THE INTERPUBLIC GROUP OF COMPANIES, INC. AND ITS SUBSIDIARIES
CONSOLIDATED SUMMARY OF EARNINGS FOURTH QUARTER REPORT 2000 AND 1999
(UNAUDITED)
(Amounts in Thousands Except Per Share Data)
Three Months Ended December 31,
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Post-Restructuring and Pre-Restructuring and Pre-Restr.
Special Compensation Costs Special Compensation Costs %Favorable
2000 1999 2000 1999 (Unfavorable)
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Revenue
United States $ 819,839 $ 744,516 $ 819,839 $ 744,516 10.1
International $ 781,022 $ 772,931 $ 781,022 $ 772,931 1.0
Total Revenue $ 1,600,861 $ 1,517,447 $ 1,600,861 $ 1,517,447 5.5
Operating Costs $ 1,323,539 $ 1,296,207 $ 1,323,539 $ 1,296,207 (2.1)
Amortization of Intangible Assets $ 35,003 $ 41,724 $ 35,003 $ 41,724 16.1
Restructuring and other Merger Related Costs $ - $ 84,183 $ - $ - N/A
Non-recurring Transaction Costs (a) $ 44,715 $ - $ - $ - N/A
Income from Operations $ 197,604 $ 95,333 $ 242,319 $ 179,516 35.0
Interest Expense $ (34,276) $ (21,561) $ (34,276) $ (21,561) (59.0)
Other Income, Net $ 31,380 $ 46,314 $ 31,380 $ 46,314 (32.2)
Income Before Provision for Income Taxes $ 194,708 $ 120,086 $ 239,423 $ 204,269 17.2
Provision for Income Taxes $ 82,789 $ 51,703 $ 85,912 $ 84,449 (1.7)
Net Equity Interests (b) $ (8,735) $ (12,506) $ (8,735) $ (12,506) 30.2
Net Income $ 103,184 $ 55,877 $ 144,776 $ 107,314 34.9
Per Share Data:
Basic E.P.S. $ 0.34 $ 0.19 $ 0.47 $ 0.36 30.6
Diluted E.P.S. (c) $ 0.33 $ 0.18 $ 0.46 $ 0.35 31.4
Dividend per share - Interpublic $ 0.095 $ 0.085 $ 0.095 $ 0.085 11.8
Weighted Average Shares:
Basic 306,653 298,698 306,653 298,698
Diluted 321,715 309,790 328,075 316,483
Twelve Months Ended December 31,
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Post-Restructuring and Pre-Restructuring and Pre-Restr.
Special Compensation Costs Special Compensation Costs %Favorable
2000 1999 2000 1999 (Unfavorable)
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Revenue
United States $ 3,073,854 $ 2,560,161 $ 3,073,854 $ 2,560,161 20.1
International $ 2,551,991 $ 2,417,662 $ 2,551,991 $ 2,417,662 5.6
Total Revenue $ 5,625,845 $ 4,977,823 $ 5,625,845 $ 4,977,823 13.0
Operating Costs $ 4,679,845 $ 4,215,818 $ 4,679,846 $ 4,215,818 (11.0)
Amortization of Intangible Assets $ 112,478 $ 99,326 $ 112,478 $ 99,326 (13.2)
Restructuring and other Merger Related Costs $ 116,131 $ 84 183 $ - $ - N/A
Non-recurring Transaction Costs (a) $ 44,715 $ - $ - $ - N/A
Income from Operations $ 672,676 $ 578,496 $ 833,521 $ 662,679 25.8
Interest Expense $ (109,111) $ (81,341) $ (109,111) $ (81,341) (34.1)
Other Income, Net $ 94,341 $ 103,562 $ 94,341 $ 103,562 (8.9)
Income Before Provision for Income Taxes $ 657,906 $ 600,717 $ 818,751 $ 684,900 19.5
Provision for Income Taxes $ 273,034 $ 243,971 $ 319,352 $ 276,717 (15.4)
Net Equity Interests (b) $ (26,214) $ (25,459) $ (26,214) $ (25,459) (3.0)
Net Income $ 358,658 $ 331,287 $ 473,185 $ 382,724 23.6
Per Share Data:
Basic E.P.S. $ 1.18 $ 1.11 $ 1.56 $ 1.28 21.9
Diluted E.P.S. (d) $ 1.15 $ 1.07 $ 1.51 $ 1.24 21.8
Dividend per share - Interpublic $ 0.370 $ 0.330 $ 0.370 $ 0.330 12.1
Weighted Average Shares:
Basic 303,192 297,992 303,192 297,992
Diluted 312,653 308,839 319,346 315,532
(a) Costs incurred in connection with the acquisition of Deutsch, Inc. accounted
for as a pooling of interests.
(b) Net equity interests is the net of equity in income of unconsolidated
affiliates less income attributable to minority interests of consolidated
subsidiaries.
(c) 2000 Post-Restructuring and 1999 Pre-Restructuring includes the assumed
conversion of the 1.80% Convertible Subordinated Notes. 2000 Pre-Restructuring
includes the assumed conversion of the 1.80% and 1.87% Convertible Subordinated
Notes.
(d) 2000 and 1999 Pre-Restructuring includes the assumed conversion of the 1.8%
Convertible Subordinated Notes.
All prior data has been restated to reflect the aggregate effect of Deutsch,
Inc., NFO Worldwide, Inc. and several other acquisitions accounted for as
poolings of interests.
