UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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[X] |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE |
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[ ] |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE |
Commission File Number: 1 -6686
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Delaware incorporation or organization) |
13 -1024020 Identification No.) |
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1271 Avenue of the Americas, New York, New York |
10020 |
Registrant's telephone number, including area code (212) 399 -8000
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Common Stock outstanding at July 31, 2002: 383,735,876 shares.
THE INTERPUBLIC GROUP OF COMPANIES, INC. AND SUBSIDIARIES
I N D E X
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Item 1. |
Financial Statements |
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Consolidated Statement of Operations |
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Three months ended June 30, 2002 |
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and 2001 (unaudited) |
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Consolidated Statement of Operations |
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Six months ended June 30, 2002 |
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and 2001 (unaudited) |
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Consolidated Balance Sheet |
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June 30, 2002 (unaudited) and |
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December 31, 2001 |
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Consolidated Statement of Comprehensive Income |
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Three months ended June 30, 2002 |
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and 2001 (unaudited) |
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Consolidated Statement of Comprehensive Income |
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Six months ended June 30, 2002 |
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and 2001 (unaudited) |
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Consolidated Statement of Cash Flows |
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Six months ended June 30, 2002 |
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and 2001 (unaudited) |
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Notes to Consolidated Financial Statements (unaudited) |
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Item 2. |
Management's Discussion and Analysis of |
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Financial Condition and Results of Operations |
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Item 3. |
Quantitative and Qualitative Disclosures |
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about Market Risk |
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Item 2(c) |
CHANGES IN SECURITIES |
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Item 4. |
SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS |
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Item 6. |
EXHIBITS AND REPORTS ON FORM 8-K. |
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SIGNATURES |
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INDEX TO EXHIBITS |
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Item 1 |
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THE INTERPUBLIC GROUP OF COMPANIES, INC. AND SUBSIDIARIES |
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CONSOLIDATED STATEMENT OF OPERATIONS |
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THREE MONTHS ENDED JUNE 30, |
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(Amounts in Millions, Except Per Share Amounts) |
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(unaudited) |
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2001 |
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2002 |
(Restated) |
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REVENUE |
$1,613.0 |
$1,760.4 |
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OPERATING EXPENSES: |
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Salaries and related expenses |
883.6 |
972.4 |
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Office and general expenses |
488.6 |
504.1 |
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Amortization of intangible assets |
2.3 |
42.2 |
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Restructuring and other merger related costs |
-- |
51.3 |
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Goodwill impairment and other charges |
-- |
221.4 |
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Total operating expenses |
1,374.5 |
1,791.4 |
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OPERATING INCOME (LOSS) |
238.5 |
(31.0 ) |
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OTHER INCOME (EXPENSE): |
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Interest expense |
(36.9) |
(41.4) |
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Interest income |
8.1 |
10.4 |
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Other income |
10.3 |
3.3 |
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Investment impairment |
(16.2 ) |
-- |
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Total other income (expense) |
(34.7 ) |
(27.7 ) |
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Income (loss) before provision for income taxes |
203.8 |
(58.7) |
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Provision for income taxes |
79.3 |
46.3 |
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Income (loss) of consolidated companies |
124.5 |
(105.0) |
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Income applicable to minority interests |
(11.1) |
(10.5) |
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Equity in net income of unconsolidated affiliates |
3.6 |
2.4 |
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NET INCOME (LOSS) |
$ 117.0 |
$ (113.1 ) |
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Earnings (loss) per share: |
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Basic |
$ 0.31 |
$ (0.31) |
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Diluted |
$ 0.31 |
$ (0.31) |
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Weighted average shares: |
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Basic |
375.7 |
368.9 |
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Diluted |
389.1 |
368.9 |
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Cash dividends per share |
$ 0.095 |
$ 0.095 |
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The accompanying notes are an integral part of these financial statements.
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THE INTERPUBLIC GROUP OF COMPANIES, INC. AND SUBSIDIARIES |
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CONSOLIDATED STATEMENT OF OPERATIONS |
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SIX MONTHS ENDED JUNE 30, |
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(Amounts in Millions, Except Per Share Amounts) |
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(unaudited) |
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2002 |
2001 |
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(Restated) |
(Restated) |
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REVENUE |
$3,033.1 |
$3,435.6 |
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OPERATING EXPENSES: |
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Salaries and related expenses |
1,745.4 |
1,971.2 |
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Office and general expenses |
906.6 |
985.1 |
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Amortization of intangible assets |
3.8 |
84.1 |
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Restructuring and other merger related costs |
-- |
52.9 |
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Goodwill impairment and other charges |
-- |
221.4 |
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Total operating expenses |
2,655.8 |
3,314.7 |
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OPERATING INCOME |
377.3 |
120.9 |
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OTHER INCOME (EXPENSE): |
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Interest expense |
(72.2) |
(78.9) |
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Interest income |
15.0 |
23.3 |
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Other income |
10.6 |
11.9 |
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Investment impairment |
(16.2 ) |
(160.1 ) |
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Total other income (expense) |
(62.8 ) |
(203.8 ) |
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Income (loss) before provision for income taxes |
314.5 |
(82.9) |
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Provision for income taxes |
121.4 |
46.2 |
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Income (loss) of consolidated companies |
193.1 |
(129.1) |
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Income applicable to minority interests |
(14.7) |
(17.4) |
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Equity in net income of unconsolidated affiliates |
4.5 |
4.1 |
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NET INCOME (LOSS) |
$ 182.9 |
$ (142.4 ) |
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Earnings (loss) per share: |
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Basic |
$ 0.49 |
$ (0.39) |
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Diluted |
$ 0.48 |
$ (0.39) |
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Weighted average shares: |
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Basic |
374.3 |
367.5 |
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Diluted |
381.1 |
367.5 |
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Cash dividends per share |
$ 0.19 |
$ 0.19 |
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The accompanying notes are an integral part of these financial statements.
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THE INTERPUBLIC GROUP OF COMPANIES, INC. AND SUBSIDIARIES |
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CONSOLIDATED BALANCE SHEET |
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(Amounts in Millions, Except Per Share Amounts) |
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June 30, |
December 31, |
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2002 |
2001 |
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(Unaudited) |
(Restated) |
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CURRENT ASSETS: |
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Cash and cash equivalents |
$ 537.3 |
$ 935.2 |
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Account receivables (net of allowance for doubtful |
4,959.2 |
4,713.3 |
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Expenditures billable to clients |
474.0 |
333.0 |
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Deferred taxes on income |
44.5 |
80.0 |
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Prepaid expenses and other current assets |
391.9 |
338.5 |
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Total current assets |
6,406.9 |
6,400.0 |
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FIXED ASSETS, AT COST: |
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Land and buildings |
168.0 |
161.1 |
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Furniture and equipment |
1,128.7 |
1,085.8 |
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Leasehold improvements |
504.6 |
461.4 |
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1,801.3 |
1,708.3 |
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Less: accumulated depreciation |
(938.6 ) |
(858.0 ) |
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Total fixed assets |
862.7 |
850.3 |
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OTHER ASSETS: |
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Investment in unconsolidated affiliates |
183.1 |
165.0 |
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Deferred taxes on income |
467.4 |
492.8 |
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Other assets and miscellaneous investments |
437.2 |
432.5 |
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Goodwill |
3,322.4 |
3,004.7 |
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Other intangible assets (net of accumulated |
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amortization: 2002-$32.2; 2001-$24.0) |
92.9 |
102.2 |
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Total other assets |
4,503.0 |
4,197.2 |
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TOTAL ASSETS |
$11,772.6 |
$11,447.5 |
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THE INTERPUBLIC GROUP OF COMPANIES, INC. AND SUBSIDIARIES |
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CONSOLIDATED BALANCE SHEET |
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(Amounts in Millions, Except Per Share Amounts) |
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LIABILITIES AND STOCKHOLDERS' EQUITY |
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June 30, |
December 31, |
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2002 |
2001 |
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(Unaudited) |
(Restated) |
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CURRENT LIABILITIES: |
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Accounts payable |
$ 4,777.5 |
$ 4,525.2 |
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Accrued expenses |
1,014.2 |
1,316.5 |
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Loans payable |
598.6 |
453.1 |
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Accrued income taxes |
48.4 |
75.2 |
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Dividends payable |
-- |
36.0 |
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Total current liabilities |
6,438.7 |
6,406.0 |
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NON-CURRENT LIABILITIES: |
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Long-term debt |
1,243.1 |
1,356.8 |
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Convertible subordinated notes |
556.5 |
548.5 |
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Zero-coupon convertible senior notes |
578.1 |
575.3 |
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Deferred compensation |
416.1 |
376.7 |
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Accrued postretirement benefits |
56.5 |
54.4 |
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Other non-current liabilities |
110.8 |
100.5 |
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Minority interests in consolidated subsidiaries |
89.1 |
89.3 |
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Total non-current liabilities |
3,050.2 |
3,101.5 |
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Commitments and contingencies (Note 12) |
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STOCKHOLDERS' EQUITY: |
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Preferred stock, no par value, |
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shares authorized: 20.0, shares issued: none |
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Common stock, $0.10 par value, |
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shares authorized: 550.0, |
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shares issued: 2002 - 388.4; 2001 - 385.8 |
38.8 |
38.6 |
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Additional paid-in capital |
1,808.8 |
1,785.2 |
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Retained earnings |
1,118.3 |
971.9 |
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Accumulated other comprehensive loss, net of tax |
(365.0 ) |
(451.5 ) |
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2,600.9 |
2,344.2 |
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Less: |
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Treasury stock, at cost: 2002 - 4.9 shares; 2001 - 7.3 shares |
(193.5) |
(290.2) |
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Unamortized deferred compensation |
(123.7 ) |
(114.0 ) |
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Total stockholders' equity |
2,283.7 |
1,940.0 |
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY |
$11,772.6 |
$11,447.5 |
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The accompanying notes are an integral part of these financial statements.
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CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME |
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THREE MONTHS ENDED JUNE 30, |
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(Amounts in Millions) |
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(unaudited) |
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2001 |
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2002 |
(Restated) |
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Net Income (Loss) |
$117.0 |
$(113.1 ) |
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Foreign Currency Translation Adjustments |
107.7 |
(11.7 ) |
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Unrealized Holding Gains (Losses) on Securities |
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Unrealized holding gains |
-- |
9.1 |
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Tax expense |
-- |
(3.8) |
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Unrealized holding losses |
(5.6) |
-- |
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Tax benefit |
2.4 |
-- |
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Reclassification of unrealized loss to net earnings |
-- |
-- |
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Tax benefit |
-- |
-- |
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Unrealized holding gains (losses) on securities |
(3.2 ) |
5.3 |
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Comprehensive Income (Loss) |
$221.5 |
$(119.5 ) |
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The accompanying notes are an integral part of these consolidated financial statements.
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THE INTERPUBLIC GROUP OF COMPANIES, INC. AND SUBSIDIARIES |
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CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME |
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SIX MONTHS ENDED JUNE 30, |
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(Amounts in Millions) |
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(unaudited) |
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2002 |
2001 |
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(Restated) |
(Restated) |
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Net Income (Loss) |
$182.9 |
$(142.4 ) |
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Foreign Currency Translation Adjustments |
89.2 |
(99.0 ) |
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Unrealized Holding Gains (Losses) on Securities |
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Unrealized holding gains |
-- |
90.8 |
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Tax expense |
-- |
(38.0) |
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Unrealized holding losses |
(4.7) |
-- |
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Tax benefit |
2.0 |
-- |
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Reclassification of unrealized loss to net earnings |
-- |
-- |
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Tax benefit |
-- |
-- |
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Unrealized holding gains (losses) on securities |
(2.7 ) |
52.8 |
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Comprehensive Income (Loss) |
$269.4 |
$(188.6 ) |
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The accompanying notes are an integral part of these consolidated financial statements.
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CONSOLIDATED STATEMENT OF CASH FLOWS |
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SIX MONTHS ENDED JUNE 30, |
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(Amounts in Millions) |
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(unaudited) |
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2002 |
2001 |
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(Restated) |
(Restated) |
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CASH FLOWS FROM OPERATING ACTIVITIES: |
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Net income (loss) |
$ 182.9 |
$ (142.4) |
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Adjustments to reconcile net income (loss) to |
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cash provided by (used in) operating activities: |
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Depreciation and amortization of fixed assets |
98.7 |
104.1 |
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Amortization of intangible assets |
3.8 |
84.1 |
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Amortization of restricted stock awards and bond discounts |
39.4 |
33.4 |
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Provision for (benefit of) deferred income taxes |
59.3 |
(82.1) |
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Undistributed equity earnings |
(4.5) |
(4.1) |
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Income applicable to minority interests |
14.7 |
17.4 |
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Restructuring charges - non cash |
-- |
30.2 |
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Goodwill impairment and other |
-- |
197.4 |
|
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Investment impairment |
16.2 |
160.1 |
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Other |
(9.7) |
(8.7) |
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Change in assets and liabilities, net of acquisitions: |
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Accounts receivable |
(43.8) |
220.1 |
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Expenditures billable to clients |
(128.4) |
(61.5) |
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Prepaid expenses and other current assets |
(30.5) |
(42.8) |
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Accounts payable, accrued expenses and other current liabilities |
(180.5) |
(776.5) |
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Accrued income taxes |
(28.1) |
(60.1) |
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Other non-current assets and liabilities |
30.1 |
11.5 |
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Net cash provided by (used in) operating activities |
19.6 |
(319.9 ) |
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CASH FLOWS FROM INVESTING ACTIVITIES: |
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Acquisitions, net of cash acquired |
(206.5) |
(142.4) |
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Capital expenditures |
(81.9) |
(124.7) |
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Proceeds from sales of businesses |
0.2 |
12.2 |
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Proceeds from sales of long-term investments |
39.3 |
14.9 |
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Purchases of long-term investments |
(38.5) |
(15.4) |
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Maturities of short-term marketable securities |
23.5 |
15.6 |
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Purchases of short-term marketable securities |
(9.3) |
(33.6) |
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Other investments and miscellaneous assets |
(56.4 ) |
(86.1 ) |
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Net cash used in investing activities |
(329.6 ) |
(359.5 ) |
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CASH FLOWS FROM FINANCING ACTIVITIES: |
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Increase in short-term bank borrowings |
88.8 |
787.0 |
|
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Proceeds from long-term debt |
1.5 |
150.0 |
|
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Payments of long-term debt |
(132.1) |
(261.7) |
|
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Treasury stock acquired |
(7.7) |
(100.1) |
|
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Issuance of common stock |
44.2 |
56.4 |
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Cash dividends - Interpublic |
(72.5) |
(59.5) |
|
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Cash dividends - pooled companies |
-- |
(15.1 ) |
|
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Net cash provided by (used in) financing activities |
(77.8 ) |
557.0 |
|
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Effect of exchange rates on cash and cash equivalents |
(10.1 ) |
(36.1 ) |
|
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Decrease in cash and cash equivalents |
(397.9) |
(158.5) |
|
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Cash and cash equivalents at beginning of year |
935.2 |
844.6 |
|
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Cash and cash equivalents at end of period |
$ 537.3 |
$ 686.1 |
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The accompanying notes are an integral part of these consolidated financial statements.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
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1. |
Basis of Presentation In the opinion of management, the financial statements included herein contain all adjustments (consisting of normal recurring accruals) necessary to present fairly the financial position, results of operations and cash flows at June 30, 2002 and for all periods presented. These consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in The Interpublic Group of Companies, Inc.'s (the "Company" or "Interpublic") December 31, 2001 Annual Report to Stockholders. As discussed in Note 2, the financial statements for prior years have been restated. The operating results for the first six months of the year are not necessarily indicative of the results for the year or other interim periods. |
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Certain prior year amounts have been reclassified to conform with current year presentation. Additionally, as discussed in Note 7 below, the consolidated statement of operations is not comparable to the prior year reflecting a change in accounting principle pursuant to Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets. |
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2. |
Restatement As a result of this review, the Company identified $68.5 million of charges, principally in Europe and exclusive to a single agency network, which were not properly expensed but rather included in accounts receivable. Although the Company does not believe the amounts involved are material to any prior period, the Company has restated its previously issued financial statements as the aggregate amount of this error would be material to the 2002 second quarter operating results. The Company has strengthened certain control processes in order to prevent this situation from recurring. The Company is also conducting an additional review of internal procedures and personnel. See Note 11 for a description of waivers that have been secured to ensure compliance with credit agreements. The table below presents a summary of the impact of restating the financial statements for the periods December 31, 1997 through March 31, 2002. |
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CONSOLIDATED STATEMENT OF OPERATIONS |
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As |
As |
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Three months ended March 31, 2002 |
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|
- Operating income |
$ 140.1 |
$138.8 |
||||
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- Net income |
$ 66.7 |
$ 65.9 |
||||
|
- Earnings per share - Basic |
$ 0.18 |
$ 0.18 |
||||
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- Earnings per share - Diluted |
$ 0.18 |
$ 0.17 |
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Three months ended March 31, 2001 |
||||||
|
- Operating income |
$ 153.1 |
$152.0 |
||||
|
- Net loss |
$ (28.8) |
$(29.2) |
||||
|
- Loss per share - Basic |
$ (0.08) |
$(0.08) |
||||
|
- Loss per share - Diluted |
$ (0.08) |
$(0.08) |
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
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As |
As |
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Three months ended June 30, 2001 |
||||||
|
- Operating loss |
$ (26.2) |
$ (31.0) |
||||
|
- Net loss |
$(110.2) |
$(113.1) |
||||
|
- Loss per share - Basic |
$ (0.30) |
$ (0.31) |
||||
|
- Loss per share - Diluted |
$ (0.30) |
$ (0.31) |
||||
|
Three months ended September 30, 2001 |
||||||
|
- Operating loss |
$(570.6) |
$(571.4) |
||||
|
- Net loss |
$(477.5) |
$(477.8) |
||||
|
- Loss per share - Basic |
$ (1.29) |
$ (1.29) |
||||
|
- Loss per share - Diluted |
$ (1.29) |
$ (1.29) |
||||
|
Three months ended December 31, 2001 |
||||||
|
- Operating income |
$ 235.6 |
$ 232.0 |
||||
|
- Net income |
$ 111.2 |
$ 108.9 |
||||
|
- Earnings per share - Basic |
$ 0.30 |
$ 0.29 |
||||
|
- Earnings per share - Diluted |
$ 0.30 |
$ 0.29 |
||||
|
Twelve months ended December 31, 2001 |
||||||
|
- Operating loss |
$(208.1) |
$(218.4) |
||||
|
- Net loss |
$(505.3) |
$(511.2) |
||||
|
- Loss per share - Basic |
$ (1.37) |
$ (1.39) |
||||
|
- Loss per share - Diluted |
$ (1.37) |
$ (1.39) |
||||
|
Twelve months ended December 31, 2000 |
||||||
|
- Operating income |
$ 849.1 |
$ 837.8 |
||||
|
- Net income |
$ 420.3 |
$ 413.5 |
||||
|
- Earnings per share - Basic |
$ 1.17 |
$ 1.15 |
||||
|
- Earnings per share - Diluted |
$ 1.14 |
$ 1.12 |
||||
|
Twelve months ended December 31, 1999 |
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|
- Operating income |
$ 649.4 |
$ 639.8 |
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|
- Net income |
$ 359.4 |
$ 353.8 |
||||
|
- Earnings per share - Basic |
$ 1.02 |
$ 1.01 |
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|
- Earnings per share - Diluted |
$ 0.99 |
$ 0.97 |
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|
Twelve months ended December 31, 1998 |
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|
- Operating income |
$ 672.4 |
$ 664.3 |
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|
- Net income |
$ 374.2 |
$ 369.4 |
||||
|
- Earnings per share - Basic |
$ 1.08 |
$ 1.06 |
||||
|
- Earnings per share - Diluted |
$ 1.04 |
$ 1.03 |
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|
Twelve months ended December 31, 1997 |
||||||
|
- Operating income |
$ 342.6 |
$ 335.6 |
||||
|
- Net income |
$ 168.7 |
$ 164.7 |
||||
|
- Earnings per share - Basic |
$ 0.51 |
$ 0.49 |
||||
|
- Earnings per share - Diluted |
$ 0.49 |
$ 0.48 |
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|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
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