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 (Date of earliest event reported): February 28, 2002
The Interpublic Group of Companies, Inc.
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(Exact Name of Registrant as Specified in Charter)
Delaware 1-6686 13-1024020
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(State or Other Jurisdiction (Commission File (IRS Employer
of Incorporation) Number) 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
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(Former Name or Former Address, if Changed Since Last Report)
Item 5. Other Events.
On February 28, 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
February 28, 2002, announcing its fourth quarter and full-year 2001 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: March 4, 2002 By: /s/ Nicholas J. Camera
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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
EMBARGOED UNTIL 4:00 PM (EST)
INTERPUBLIC REPORTS FOURTH QUARTER AND FULL-YEAR 2001 RESULTS
Restructuring Initiatives Instrumental in Meeting Pro Forma EPS Targets
NEW YORK, NY (February 28, 2002)--The Interpublic Group of Companies, Inc.,
(NYSE:IPG) today reported pro forma earnings of $.96 per share for the full year
2001, compared to a pro forma $1.53 for 2000. Pro forma earnings are defined as
net income exclusive of restructuring and other unusual items. Results for all
periods include the operations of True North Communications, which was acquired
in a pooling-of-interests transaction on June 21.
The company's operating results continued to reflect a very difficult
advertising environment, particularly in the United States, as well as reduced
demand for other marketing services in the wake of weak economic activity.
Accordingly, revenues for the year declined 4.8% in 2001, exclusive of the loss
of the Chrysler account by Foote Cone & Belding prior to its acquisition by
Interpublic. Inclusive of this loss, revenue declined 6.3% to $6.7 billion from
$7.2 billion a year earlier. Pro forma net income for 2001 was $359.2 million,
compared to a pro forma $570.3 million in 2000.
"The past year was a challenging one for Interpublic," according to John J.
Dooner, Chairman and Chief Executive Officer. "We have addressed the situation
forcefully, with a major restructuring program and financial disciplines that
will ensure we meet our commitments to shareholders in spite of the harsh media
and marketing environment. We expect these initiatives will enhance our
operating performance going forward."
Inclusive of restructuring and other unusual items in both years, Interpublic
reported a loss of $1.37 per share in 2001, compared to earnings per share of
$1.14 in 2000. Restructuring and other unusual items are discussed later in this
release.
Fourth Quarter Results
EPS for the fourth quarter of 2001 was $.30 per share, compared with a pro forma
$.51 per share in the year-earlier quarter. In the final quarter of 2001, net
income totaled $111.2 million, compared to the prior year's pro forma $190.5
million.
Revenue was $1.7 billion for the quarter, down 16% from $2.0 billion in the
final quarter of 2000, reflecting reduced demand for most services. Domestic
revenue declined 19% to $919 million, compared to $1.1 billion in the prior
year's quarter. Exclusive of the Chrysler loss, domestic revenue declined 16.4%.
International revenue fell 12% in the quarter to $801 million. In constant
dollars, international revenue was down 7%, reflecting decreases in all regions.
Pro forma fourth quarter 2000 EPS of $.51 exclude a special charge of $17.5
million relating to the loss of the Chrysler account, a $44.7 million one-time
cost related to the acquisition of Deutsch, and a $25.8 million charge related
to the Company's portion of asset impairment and restructuring charges by Modem
Media, an investment accounted for by the equity method. Inclusive of these
charges, Interpublic earned $.30 per share in the fourth quarter of 2000.
Organic Revenue
Organic revenue accounted for 2.9 percentage points of the 6.3% revenue decline
in 2001. For the year, organic revenue was down 7% in the United States and up
3% in all other markets.
In the fourth quarter, organic revenue represented 10.1 percentage points of the
Company's 16% revenue decline, reflecting a 15% decline in the United States and
a 6% decline internationally.
A chart detailing components of revenue change follows.
Components of Revenue Change
(in millions)
Quarter Variance Year Variance
------- -------- ---- --------
2000 Revenue $2,041.8 $7,182.7
Effect of:
Organic (205.8) (10.1)% (207.4) (2.9)%
Loss of Chrysler (35.9) (1.8)% (116.3) (1.6)%
Currency Translation (52.2) (2.6)% (159.4) (2.2)%
Acquisitions (net of dispositions) (28.4) (1.3)% 62.2 .9%
September 11 (35.0) (.5)%
2001 Revenue $1,719.5 (15.8)% $6,726.8 (6.3)%
New Business
For the full year, net new business won by the company was $2.8 billion in
billings. New business wins totaled $5.5 billion, including assignments from
Verizon, Microsoft, United Parcel Service, Sepracor, L'Oreal, Pfizer/Pharmacia,
Coca-Cola and Sirius Satellite Radio. Losses totaled $2.7 billion, approximately
$750 million of which were directly related to the True North acquisition.
Independent of these anticipated merger-related account losses, net new business
for 2001 was $3.6 billion.
For the fourth quarter of 2001, net new business billings were $223 million,
again reflecting merger-related losses.
The first quarter of 2002 has seen a marked increase in new business activity,
with Interpublic agencies bringing in major assignments from Sony, MCI Worldcom,
Starwood Hotels, Zenith Electronics, Electrolux, Revlon, American Airlines,
HSBC, Tricon Global Restaurants, Nextel and Deutsche Telekom.
Revenue by Discipline
Advertising and media revenue declined 17% in the fourth quarter to $1.1
billion, reflecting a depressed advertising environment and cuts in client
spending. In the quarter, advertising and media contributed 61% of revenue.
Specialized marketing services revenue declined 14% to $667 million,
representing 39% of revenue. The company experienced disproportionate declines
in public relations, event marketing and interactive marketing.
Operating Costs and EBITDA
Operating costs declined $236 million in the quarter, reflecting the benefit of
Interpublic's restructuring initiatives in 2001 and other operating cost
reductions. An important component of the operating cost decline was a 20%
decrease in salary and related expenses to $924 million, reflecting lower
headcount and significantly reduced incentive compensation, commensurate with
performance.
Earnings before interest, taxes, depreciation and amortization (EBITDA) were
$331.8 million in the fourth quarter of 2001, representing 19.3% of revenue. In
the fourth quarter of 2000, pro forma EBITDA was $417 million, equal to 20.4% of
revenue.
Other Income (Expense)
Interest expense declined to $38.8 million in the fourth quarter, from $39.3
million a year earlier, reflecting lower average rates on higher borrowing
levels.
Other income, net, in the fourth quarter was $2.4 million. In the 2000 quarter,
other income, net, was $15.7 million, which consisted primarily of pretax gains
on the sale of securities.
Interpublic's tax rate was 43.4% in the fourth quarter of 2001, compared to pro
forma 37.8% a year earlier, primarily reflecting the effect of non-deductible
goodwill amortization on a lower income base in 2001 and a change in the tax
status of Deutsch, Inc., which was acquired in November 2000. For the full year
2001, Interpublic's pro forma tax rate was 42.5%, compared to a pro forma 40.1%
in 2000.
Balance Sheet Items
At December 31, 2001, cash and equivalents totaled $935 million. Total debt was
$2.9 billion, equal to 60% of total capital, compared to 63% at the end of the
third quarter and 46% at year-end 2000. Shareholders' equity totaled $2.0
billion.
Restructuring and Other Unusual Items
In the first three quarters of 2001, the Company recognized $646 million in
restructuring and other merger-related charges, $303 million in goodwill
impairment and other charges, and a $208 million reduction in the carrying value
of other investments. In addition, included in operating costs are charges of
$85.4 million, relating primarily to the impaired value of miscellaneous
operating assets, and a credit of $50 million resulting from reductions in
previously-established severance reserves.
Unusual charges for the full year 2000 included a total of $133 million for
restructuring and other merger-related costs and the special charge relating to
the loss of Chrysler, a $44.7 million one-time cost related to the purchase of
Deutsch, and a $25.8 million charge related to the company's portion of asset
impairment and restructuring charges by Modem Media, an investment accounted for
on the equity method.
Conference Call
Management will discuss fourth quarter results on a conference call beginning at
5 PM (EST) today. The call and a discussion outline can be accessed at the
Company's website, www.interpublic.com. An audio archive of the discussion 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 services 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, Deutsch, Foote Cone & Belding
Worldwide, Golin/Harris International, Initiative Media, Lowe & Partners
Worldwide, McCann-Erickson, Octagon, Universal McCann and Weber Shandwick.
# # #
Cautionary Statement
This document contains forward-looking statements. Interpublic's representatives
may also make forward-looking statements orally from time to time. Statements
that are not historical fact, 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 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,
developments from changes in the regulatory and legal environment for
advertising 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 its 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 includes financial information calculated on a "pro forma" basis.
This "pro forma" financial information, by its very nature, departs from
traditional accounting conventions. Accordingly, "pro forma" financial
information should be read in conjunction with, and should not be viewed as a
substitute for, the information prepared in accordance with Generally Accepted
Accounting Principles (GAAP) contained in this document, including the GAAP
numbers under the "actual reported" columns in the unaudited "consolidate
summaries of earnings" contained in this document.
Investors should evaluate any Interpublic statements in light of these important
factors.
THE INTERPUBLIC GROUP OF COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED SUMMARY OF EARNINGS
FOURTH QUARTER REPORT 2001 AND 2000 (UNAUDITED)
(Amounts in Millions Except per Share Data)
Three Months Ended December 31,
-----------------------------------------------------
Actual Reported Pro Forma Pro Forma %
2001 2000 2001 2000 Variance
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Revenue
United States $ 918.5 $1,131.1 $ 918.5 $1,131.1 (18.8)
International 801.0 910.7 801.0 910.7 (12.0)
-------- -------- -------- -------- --------
Total Revenue 1,719.5 2,041.8 1,719.5 2,041.8 (15.8)
Operating Costs 1,437.8 1,674.0 1,437.8 1,674.0 14.1
Amortization of Intangible Assets 46.1 42.4 46.1 42.4 (8.7)
Restructuring and Other Merger Related Costs -- 17.5 -- -- --
Goodwill Impairment & Other -- 44.7 -- -- --
-------- -------- -------- -------- --------
Income from Operations 235.6 263.2 235.6 325.4 (27.6)
Other Income (Expense)
Interest Expense (38.8) (39.3) (38.8) (39.3) 1.3
Interest Income 13.0 22.2 13.0 22.2 (41.4)
Other Income, Net 2.4 15.7 2.4 15.7 (84.7)
-------- -------- -------- -------- --------
Total Other Income (Expense) (23.4) (1.4) (23.4) (1.4) N/A
Income before Provision for Income Taxes 212.2 261.8 212.2 324.0 (34.5)
Provision for Income Taxes 92.0 112.1 92.0 122.6 25.0
Net Equity Interests (a) (9.0) (36.7) (9.0) (10.9) 17.4
-------- -------- -------- -------- --------
Net Income $ 111.2 $ 113.0 $ 111.2 $ 190.5 (41.6)
======== ======== ======== ======== ========
Per Share Data:
Basic EPS $ 0.30 $ 0.31 $ 0.30 $ 0.52 (42.3)
Diluted EPS $ 0.30 $ 0.30 $ 0.30 $ 0.51 (41.2)
Dividend per share - Interpublic $ 0.095 $ 0.095 $ 0.095 $ 0.095 0.0
Weighted Average Shares:
Basic 371.3 363.5 371.3 363.5
Diluted 377.2 373.3 377.2 386.4
(a) Net equity interests is the net of equity in income of unconsolidated
affiliates less net income attributable to minority interests of
consolidated subsidiaries. Pro forma 2000 amount excludes $25.8 million
charge related to the Company's portion of asset impairment and
restructuring charges by Modem Media.
Prior year data have been restated to reflect the effect of the True North
Communications, Inc. acquisition accounted for as a pooling of interests.
THE INTERPUBLIC GROUP OF COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED SUMMARY OF EARNINGS
FULL YEAR 2001 AND 2000 (UNAUDITED)
(Amounts in Millions Except per Share Data)
Twelve Months Ended December 31,
-----------------------------------------------------
Actual Reported Pro Forma Pro Forma %
2001 2000 2001 2000 Variance
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Revenue
United States $3,805.8 $4,244.2 $3,805.8 $4,244.2 (10.3)
International 2,921.0 2,938.5 2,921.0 (0.6)
-------- -------- -------- -------- --------
2,938.5
Total Revenue 6,726.8 7,182.7 6,726.8 7,182.7 (6.3)
Operating Costs (a) 5,813.2 6,011.6 5,777.8 6,011.6 3.9
Amortization of Intangible Assets 173.0 144.3 173.0 144.3 (19.9)
Restructuring and other Merger Related Costs 645.6 133.0 -- -- --
Goodwill Impairment & Other 303.1 44.7 -- -- --
-------- -------- -------- -------- --------
Income (Loss) from Operations (208.1) 849.1 776.0 1,026.8 (24.4)
-------- -------- -------- -------- --------
Other Income (Expense)
Interest Expense (164.6) (126.3) (164.6) (126.3) (30.3)
Investment Impairment (208.3) -- -- -- N/A
Interest Income 43.0 57.5 43.0 57.5 (25.2)
Other Income, Net 13.7 46.2 13.7 46.2 (70.3)
-------- -------- -------- -------- --------
Total Other Income (Expense) (316.2) (22.6) (107.9) (22.6) N/A
-------- -------- -------- -------- --------
Income (Loss) before Provision for Income Taxes (524.3) 826.5 668.1 1,004.2 (33.5)
Provision (Benefit) for Income Taxes (43.9) 348.8 284.0 402.2 29.4
Net Equity Interests (b) (24.9) (57.4) (24.9) (31.7) 21.5
-------- -------- -------- -------- --------
Net Income (Loss) $ (505.3) $ 420.3 $ 359.2 $ 570.3 (37.0)
======== ======== ======== ======== ========
Per Share Data:
Basic EPS $ (1.37) $ 1.17 $ 0.97 $ 1.59 (39.0)
Diluted EPS $ (1.37) $ 1.14 $ 0.96 $ 1.53 (37.3)
Dividend per share - Interpublic $ 0.380 $ 0.37 $ 0.380 $ 0.370 2.7
Weighted Average Shares:
Basic 369.0 359.6 369.0 359.6
Diluted 369.0 370.6 376.6 377.3
(a) Pro forma 2001 amount excludes charges of $85.4 million relating primarily
to the impaired value of miscellaneous operating assets, and a credit of
$50 million resulting from reductions in previously-established severance
reserves.
(b) Net equity interests is the net of equity in income of unconsolidated
affiliates less income attributable to minority interests on consolidated
subsidiaries. Pro forma 2000 amount excludes $25.8 million charge related
to the Company's portion of asset impairment and restructuring charges by
Modem Media.
Prior year data have been restated to reflect the effect of the True North
Communications, Inc. acquisition accounted for as a pooling of interests.