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): October 16, 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 October 16, 2002, The Interpublic Group of Companies, Inc. issued a
press release, a copy of which is attached hereto as Exhibit 99.1.
In addition, attached hereto as Exhibit 10.1 is a letter agreement that
provides for the extension of the waiver relating to certain provisions of
Interpublic's revolving credit agreements obtained by the company in connection
with the earnings restatement referenced in the attached press release.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
Exhibits.
Exhibit 10.1: Letter Agreement, dated as of September 30, 2002, among The
Interpublic Group of Companies, Inc. and certain lenders party to the 364-Day
Credit Agreement and the 5-Year Credit Agreement, each with Citibank, N.A. as
Administrative Agent.
Exhibit 99.1: Press Release of The Interpublic Group of Companies, Inc., dated
October 16, 2002, forecasting lower earnings for the third quarter and 2002.
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: October 17, 2002 By: /s/ Marjorie Hoey
-------------------------------
Marjorie Hoey
VICE PRESIDENT,
ASSOCIATE GENERAL COUNSEL AND
ASSISTANT SECRETARY
THE INTERPUBLIC GROUP OF COMPANIES, INC.
WORLDWIDE ADVERTISING AND MARKETING COMMUNICATIONS
STEVEN BERNS
Vice President & Treasurer
Tel. 212-621-5770
Fax: 212-621-5748
sberns@interpublic.com
September 30, 2002
Citibank, N.A., as Agent for the
Lenders party to the Credit
Agreement referred to below
Two Penns Way
New Castle, Delaware 19720
Attention: Bank Loan Syndications
Department
Ladies and Gentlemen:
We refer to the two letter agreements (collectively, the "Letter
Agreements" and individually a "Letter Agreement"), each dated as of August 6,
2002, among the Company and the Required Lenders named therein relating to each
of the two Credit Agreements, as amended, among The Interpublic Group of
Companies, Inc., the initial lenders named therein, and Citibank, N.A. as
Administrative Agent, one for a term of 364 days the other for a term of 5
years, respectively (collectively, the "Credit Agreements" and individually a
"Credit Agreement"). Capitalized terms used but not defined herein are used with
the meanings given to those terms in the Credit Agreement.
The Company requests that the Lenders agree to extend the termination
date of the waiver contained in each Letter Agreement to the earlier of (x)
November 14, 2002 and (y) the filing by the Company with the Securities and
Exchange Commission of restated financial statements in respect of the Event (as
defined in the Letter Agreements).
This letter agreement, including the foregoing extension, constitutes
the entire agreement of the parties relating to the extension of the termination
date of the waivers contained in the Letter Agreements and supersedes any
previous understanding or agreement by the parties with respect thereto.
Please indicate your agreement, as well as the agreement of each of the
Lenders named below, with the foregoing extension by having the enclosed
duplicate copy of this letter agreement executed in the space provided below by
a duly authorized representative of each of the Lenders named below and return
the same to Susan Hobart at Sherman & Sterling via facsimile at (212) 848-7179
prior to 11:00AM on October 15, 2002 and mail the original to her office at 599
Lexington Avenue, New York, NY 10022.
THE INTERPUBLIC GROUP OF
COMPANIES, INC.
By: /s/ Steven Berns
-------------------------------
Name: STEVEN BERNS
Title: VICE PRESIDENT & TREASURER
Confirmed and Agreed:
CITIBANK, N.A.
By: /s/ Carolyn A. Kee
------------------------------
Name: CAROLYN A. KEE
Title: VICE PRESIDENT
BANCA POPOLARE DI BERGAMO-CV
By: /s/ Riccardo Sora
------------------------------
Name: RICCARDO SORA
Title: DEPUTY GENERAL MANAGER
BANK OF AMERICA, N.A.
By: /s/ William K. Burton
------------------------------
Name: WILLIAM K. BURTON
Title: MANAGING DIRECTOR
BANK OF TOKYO-MITSUBISHI TRUST COMPANY
By: /s/ Spencer Hughes
------------------------------
Name: SPENCER HUGHES
Title: VICE PRESIDENT
BANK ONE, NA (MAIN OFFICE CHICAGO)
By: /s/ Jeffrey Lubatkin
------------------------------
Name: JEFFREY LUBATKIN
Title: DIRECTOR
BARCLAYS BANK PLC
By: /s/ Nicholas Bell
------------------------------
Name: NICHOLAS BELL
Title: DIRECTOR
BNP PARIBAS
By: /s/ Simone G. Vinocour McKeever
-------------------------------
Name: SIMONE G. VINOCOUR McKEEVER
Title: VICE PRESIDENT
By: /s/ Arnaud Collin du Bocage
------------------------------
Name: ARNAUD COLLIN du BOCAGE
Title: MANAGING DIRECTOR
FLEET NATIONAL BANK
By: /s/ Thomas J. Levy
------------------------------
Name: THOMAS J. LEVY
Title: SENIOR VICE PRESIDENT
HSBC BANK USA
By: /s/ Johan Sorensson
------------------------------
Name: JOHAN SORENSSON
Title: HSBC BANK USA
ING CAPITAL LLC
By: /s/ William James
------------------------------
Name: WILLIAM JAMES
Title: DIRECTOR
JPMORGAN CHASE BANK
By: /s/ Thomas J. Cox
------------------------------
Name: THOMAS J. COX
Title: VICE PRESIDENT
KEYBANK NATIONAL ASSOCIATION
By: /s/ Lawrence A. Mack
------------------------------
Name: LAWRENCE A. MACK
Title: SENIOR VICE PRESIDENT
LLOYDS TSB BANK PLC
By: /s/ Richard M. Heath
------------------------------
Name: RICHARD M. HEATH
Title: VICE PRESIDENT
By: /s/ Lisa Maguire
------------------------------
Name: LISA MAGUIRE
Title: ASSISTANT VICE PRESIDENT
MIZUHO CORPORATE BANK, LTD.
By: /s/ Raymond Ventura
------------------------------
Name: RAYMOND VENTURA
Title: SENIOR VICE PRESIDENT
ROYAL BANK OF CANADA
By: /s/ Suzanne Kaicher
------------------------------
Name: SUZANNE KAICHER
Title: MANAGER
SUNTRUST BANK
By: /s/ Jennifer DeAtley
------------------------------
Name: JENNIFER DeATLEY
Title: ASSISTANT VICE PRESIDENT
THE NORTHERN TRUST COMPANY
By: /s/ Russ Rockenbach
------------------------------
Name: RUSS ROCKENBACH
Title: VICE PRESIDENT
WACHOVIA
By: /s/ Anne L. Sayles
------------------------------
Name: ANNE L. SAYLES
Title: DIRECTOR
WESTPAC BANKING CORPORATION
By: /s/ Lisa Porter
------------------------------
Name: LISA PORTER
Title: VICE PRESIDENT
THE INTERPUBLIC GROUP OF COMPANIES, INC.
WORLDWIDE ADVERTISING AND MARKETING COMMUNICATIONS
1271 Avenue of the Americas, New York, N.Y. 10020
FOR IMMEDIATE RELEASE
INTERPUBLIC FORECASTS LOWER EARNINGS
NEW YORK, NY (October 16, 2002) -- The Interpublic Group of Companies, Inc.
today lowered its forecast for 2002 earnings to $.85-.90 per share from
$1.25-$1.35. The company also announced that it expects to report third quarter
earnings of $.08-.10 per share, compared to a consensus estimate of $.28 per
share among Wall Street analysts.
Interpublic's new forecasts recognize recent significant deterioration at its
Octagon motor sports operations, precipitous drops at a number of project-based
businesses and general revenue pressure, driven in part by faltering economies
in Latin America and Japan.
According to John J. Dooner, Jr., Interpublic's Chairman and CEO, "It is
regrettable that we have had to revise our earnings forecast, but this new
guidance reflects the difficult economic conditions we are facing around the
world. We are dealing with our short-term issues in marketing services
aggressively and directly. Among our other operating companies, many of our
brands are demonstrating competitive vitality, as evidenced by encouraging new
business gains."
Octagon Motor Sports
The motor sports division of Octagon consists of racing facilities in the United
Kingdom and Hong Kong, acquired in 1999 and 2000. Interpublic placed Octagon
under the control of its newly-formed Sports and Entertainment Group this
summer. Since that time, the management team of Octagon Motor Sports has been
removed and is being replaced.
Sean F. Orr, Interpublic's Chief Financial Officer, added, "Last quarter, we
identified operating issues within Octagon's motor sports business. At the time,
we believed these issues would have a negative impact on our 2002 earnings of
$.04 per share. More recent analysis indicates the negative impact will be
$.15-.20 per share. In 2001, Octagon motor sports contributed $.03 to
Interpublic's earnings per share. We are currently reassessing the composition
and structure of our motor sports holdings."
Project-Based Businesses
Certain marketing services businesses, notably corporate identity and retail
(point-of-sale) operations, experienced significant deceleration in the third
quarter. Public relations also continues to suffer from declines in the
technology and financial services industries. Given that staffing levels at
these project-based businesses anticipated a higher degree of activity, cost
reduction initiatives are being implemented and additional severance expense
will be recognized through operating income in the final two quarters of 2002.
Geographic Detail
In Japan, the company's clients have reacted to worsening economic conditions by
canceling or postponing activity. Latin America has seen rapidly deteriorating
conditions in Brazil and the reduction of spending plans by marketers in Mexico.
Approximately 7% of the company's revenue is generated in these markets.
Revenue Outlook
In the third quarter, revenue declined approximately 7%. Full year revenue is
now expected to decline approximately 9%. "We are taking appropriate actions to
cut costs in light of recent developments," said Mr. Orr. "These will negatively
impact our margins in the short term, but position us for success when revenue
growth resumes."
Earnings Restatement
Separately, the company indicated that it intends to file within the next 30
days amended Exchange Act reports for prior periods to reflect a restatement of
its historical financial statements. On August 13, the company announced that it
would restate its previously issued financial statements by $68.5 million
(pre-tax) of charges which had not been properly expensed, principally involving
certain accounts containing intra-company activity. At that time, the company
indicated that it would undertake a thorough review of these matters. This
review has identified additional charges that will also be reflected in the
restatement.
The total amount of the restatement, including the previously disclosed $68.5
million, is not expected to exceed $120 million (pre-tax). It is not anticipated
that the amounts involved were material to any prior period.
Release of Third Quarter Results
Interpublic will announce third quarter results after the 4 p.m. close of the
New York Stock Exchange on November 13, 2002. Management will host a conference
call with investors at 5 p.m. that day.
About Interpublic
The Interpublic Group of Companies is among the world's largest advertising and
marketing organizations. Its five global operating groups are the
McCann-Erickson WorldGroup, the Partnership, FCB Group, Interpublic Sports and
Entertainment Group and Advanced Marketing Services. Major brands include Draft
Worldwide, Foote Cone & Belding Worldwide, Golin/Harris International, NFO
WorldGroup, Initiative Media, Lowe & Partners Worldwide, McCann-Erickson,
Octagon, Universal McCann and Weber Shandwick.
# # #
Contact Information
Press: 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, the effect of national or global conflicts, 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, the results of the review of the facts relating to the
proposed restatement of financial results, the audit of restated financial
statements 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.
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.