View:
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): May 2, 2002
The Interpublic Group of Companies, Inc.
- --------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in Charter)
Delaware 1-6686 13-1024020
- --------------------------------------------------------------------------------
(State or Other Jurisdiction (Commission File (IRS Employer
of Incorporation) Number) Identification No.)
1271 Avenue of the Americas, New York, New York 10020
- --------------------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: 212-399-8000
- --------------------------------------------------------------------------------
(Former Name or Former Address, if Changed Since Last Report)
Item 5. Other Events.
On May 2, 2002, The Interpublic Group of Companies, Inc. issued a press
release, a copy of which is attached hereto as Exhibit 99.1.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
Exhibits.
Exhibit 99.1: Press Release of The Interpublic Group of Companies, Inc., dated
May 2, 2002, announcing its first quarter 2002 results.
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: May 3, 2002 By: /s/ Nicholas J. Camera
----------------------
Nicholas J. Camera
SENIOR VICE PRESIDENT, GENERAL
COUNSEL AND SECRETARY
Exhibit 99.1
THE INTERPUBLIC GROUP OF COMPANIES, INC.
WORLDWIDE ADVERTISING AND MARKETING COMMUNICATIONS
1271 Avenue of the Americas, New York, N.Y. 10020
Contact Information
Media: Investors:
Philippe Krakowsky Susan Watson
(212) 399-8088 (212) 399-8208
INTERPUBLIC MEETS FIRST QUARTER EPS TARGETS
Cost Savings Ahead of Plan
New Business Activity Accelerating
NEW YORK, NY (May 2, 2002)--The Interpublic Group of Companies (NYSE:IPG) today
reported earnings of $.18 per share in the first quarter of 2002, compared to a
net loss of $.08 per share, or pro forma earnings of $.20 per share, in the same
period a year ago.
Pro forma earnings are defined as net income exclusive of restructuring and
other unusual items. Due to a recent change in accounting rules, goodwill
amortization is no longer required for 2002. Pro forma results in the first
quarter of 2001 include goodwill amortization of approximately $.10 per share.
"We are satisfied with our earnings performance for the quarter and we remain on
track to deliver double-digit EPS growth in 2002," said John J. Dooner, Jr.,
Interpublic's Chairman and Chief Executive Officer. "As previously reported, we
expected that first half revenue would remain challenged and that profits would
therefore be achieved largely by means of cost savings and improved financial
discipline. That said, we are seeing growing momentum in the area of new
business, where we posted $745 million of net wins, up from $223 million in the
previous quarter."
According to Sean F. Orr, Interpublic's Chief Financial Officer, "Savings from
our restructuring program are coming on line ahead of plan. We've also made
significant improvement in our cash management during the quarter. With our
continuing focus on costs and barring a further economic downturn, we expect to
deliver double-digit earnings per share growth despite the harsh industry
climate."
Operating income in the first quarter fell 9% to $140.1 million. Operating costs
during the period, excluding goodwill amortization, declined 14% or $200.2
million. Net income in the first quarter was $66.7 million, compared to a pro
forma $76.5 million in 2001. If goodwill amortization were excluded from 2001
results, Interpublic would have earned $111.8 million in the prior year quarter.
Revenue Analysis
Revenue for the first quarter declined by 15% to $1.42 billion, from $1.68
billion a year earlier. Organic revenue declined 12.8%, reflecting lower
spending by current clients, carryover effects of merger-related client losses
in 2001 and the Company's disproportionate exposure to the U. S. advertising
sector relative to its peers. Components of the revenue change are detailed in
the following chart.
Components of Revenue Change
----------------------------
Variance
--------
Q1 Revenue (15.2)%
Effect of:
Merger Losses (Chrysler and Pepsi) (1.0)%
Currency Translation (0.9)%
Net Dispositions (0.5)%
Q1 Organic Revenue (12.8)%
Revenue Mix
Domestic revenue, which represents 58% of the company's portfolio, declined 18%
in the quarter to $830.1 million. International revenue declined 10% in the
first quarter to $590 million. On a constant currency basis, international
revenues fell by 8%.
For 2002, Interpublic has adopted new categories for reporting revenue by
discipline:
o Advertising and Media, including creative advertising and media planning and
buying;
o Marketing Communications, which includes direct marketing, sales promotion,
event marketing, healthcare, public relations, branding and interactive;
o Marketing Intelligence, which includes marketing research and consulting;
and
o Marketing Services, which includes sports and entertainment marketing, as
well as corporate meetings and events.
Advertising and Media, which represents 59% of the company's revenue, fell 17%
in the quarter to $843.5 million, compared to $1.02 billion in the 2001 quarter.
All other marketing activities, which represent 41% of the company's revenue,
declined 12% in the quarter to $576.6 million. Specifically, Marketing
Communications revenue declined 14% to $384.8 million, Marketing Intelligence
revenue declined 3% to $102.3 million and Marketing Services revenue fell 14% to
$89.5 million.
New Business
Interpublic's agencies won net new business of $745 million in the first quarter
of 2002. Major new account wins announced during the quarter included:
Advanced Micro Devices MCI Worldcom
American Airlines Nextel
Barclays Revlon
Credit Suisse Sony
Deutsche Telekom Starwood Hotels
Electrolux Tricon Global Restaurants
Exxon Mobil Wachovia
HSBC Zenith Electronics
Other Income and Expense
Interest expense declined to $35.3 million in the quarter, from $37.5 million in
the prior year quarter, reflecting higher average borrowings at lower average
rates. Interest income declined to $6.9 million from $12.9 million in the 2001
quarter. In addition, Interpublic recognized non-operating income of $.3 million
in 2002, compared to $8.5 million in 2001, when the Company realized gains on
the sale of businesses.
Income Taxes
Interpublic's tax rate was 38% in the first quarter of 2002, compared to a pro
forma 41% in 2001. The reduction is predominantly due to the effect of FAS
141/142 relating to the amortization of goodwill.
2001 Charges
In the first quarter of 2001, Interpublic incurred a pretax charge of $160.1
million ($.28 per share) to recognize the impaired value of certain investments,
primarily in publicly-traded companies.
Conference Call
Management will discuss first quarter results on a conference call beginning at
5 PM (EDT) today. The call and a discussion outline can be accessed at the
financial section of the Company's website, www.interpublic.com. An audio
archive will be available at the site for 30 days.
About Interpublic
The Interpublic Group of Companies is among the world's largest advertising and
marketing organizations. Its four global operating groups are the
McCann-Erickson World Group, The Partnership, FCB Group and Advanced Marketing
Services. Major brands include Draft Worldwide, Foote Cone & Belding Worldwide,
Golin/Harris International, Initiative Media, Lowe & Partners Worldwide,
McCann-Erickson, Octagon, Universal McCann and Weber Shandwick.
# # #
Contact Information
Media: Investors:
Philippe Krakowsky Susan Watson
(212) 399-8088 (212) 399-8208
Cautionary Statement
This document contains forward-looking statements. Interpublic's representatives
may also make forward-looking statements orally from time to time. Statements in
this document that are not historical facts, including statements about
Interpublic's beliefs and expectations, particularly regarding recent business
and economic trends, the integration of acquisitions and restructuring costs,
constitute forward-looking statements. These statements are based on current
plans, estimates and projections, and therefore undue reliance should not be
placed 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. 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 effects of national and regional economic
conditions, Interpublic's ability to attract new clients and retain existing
clients, the financial success of Interpublic's clients, developments from
changes in the regulatory and legal environment for advertising and marketing
and communications services companies around the world, and the successful
completion and integration of acquisitions which complement and expand
Interpublic's business capabilities.
One of Interpublic's business strategies is to acquire businesses that
complement and expand Interpublic's current business capabilities. Accordingly,
Interpublic is usually engaged in evaluating potential acquisition candidates.
Interpublic is frequently engaged in a number of preliminary discussions that
may result in one or more substantial acquisitions. These acquisition
opportunities require confidentiality and from time to time give rise to bidding
scenarios that require quick responses by Interpublic. Although there is
uncertainty that any of these discussions will result in definitive agreements
or the completion of any transactions, the announcement of any such transaction
may lead to increased volatility in the trading price of Interpublic's
securities.
Moreover, the success of recent or contemplated future acquisitions will depend
on the effective integration of newly-acquired businesses into Interpublic's
current operations. Important factors for integration include realization of
anticipated synergies and cost savings and the ability to retain and attract new
personnel and clients.
This document also contains financial information calculated on a "pro forma"
basis, such as results before taking into account certain types of items. In
addition, Interpublic's representatives may from time to time refer to "pro
forma" financial information. Because "pro forma" financial information by its
very nature departs from traditional accounting conventions, this information
should not be viewed as a substitute for the information prepared by Interpublic
in accordance with Generally Accepted Accounting Principles, including the
balance sheets and statements of income and cash flow contained in Interpublic's
quarterly and annual reports filed with the SEC on Forms 10-Q and 10-K.
Investors should evaluate any statements made by Interpublic in light of these
important factors.
THE INTERPUBLIC GROUP OF COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED SUMMARY OF EARNINGS
FIRST QUARTER REPORT 2002 AND 2001 (UNAUDITED)
(Amounts in Millions Except per Share Data)
Three Months Ended March 31,
-----------------------------------------------
Actual Pro Forma Pro Forma
2002 2001 2002 2001 % Variance
-------------------- -------------------- ----------
Revenue
United States $ 830.1 $1,017.0 $ 830.1 $1,017.0 (18.4)
International 590.0 658.3 590.0 658.3 (10.4)
-------- -------- -------- -------- ------
Total Revenue 1,420.1 1,675.3 1,420.1 1,675.3 (15.2)
Operating Costs 1,278.5 1,478.7 1,278.5 1,478.7 13.5
Amortization of Intangible Assets 1.5 41.9 1.5 41.9 96.4
Restructuring and Other Merger Related Costs -- 1.6 -- -- --
-------- -------- -------- -------- ------
Operating Income 140.1 153.1 140.1 154.7 (9.4)
-------- -------- -------- -------- ------
Other Income (Expense)
Interest Expense (35.3) (37.5) (35.3) (37.5) 5.9
Interest Income 6.9 12.9 6.9 12.9 (46.5)
Other Income 0.3 8.5 0.3 8.5 (96.5)
Investment Impairment -- (160.1) -- -- --
-------- -------- -------- -------- ------
Total Other Income (Expense) (28.1) (176.2) (28.1) (16.1) (74.5)
-------- -------- -------- -------- ------
Income (Loss) before Taxes 112.0 (23.1) 112.0 138.6 (19.2)
Provision for Income Taxes 42.6 0.4 42.6 56.9 25.1
Net Equity Interests (a) (2.7) (5.2) (2.7) (5.2) 48.1
-------- -------- -------- -------- ------
Net Income (Loss) $ 66.7 $ (28.7) $ 66.7 $ 76.5 (12.8)
======== ======== ======== ======== =======
Per Share Data:
Basic EPS $ 0.18 $ (0.08) $ 0.18 $ 0.21 (14.3)
Diluted EPS $ 0.18 $ (0.08) $ 0.18 $ 0.20 (10.0)
Dividend per share - Interpublic $ 0.095 $ 0.095 $ 0.095 $ 0.095 --
Weighted Average Shares:
Basic 373.0 366.1 373.0 366.1
Diluted 379.8 366.1 379.8 376.3
(a) Net equity interests is the net of equity in income of unconsolidated
affiliates less net income attributable to minority interests of
consolidated subsidiaries.