UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
|
[X] |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
|
[ ] |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE |
Commission File Number: 1-6686
|
Delaware incorporation or organization) |
13-1024020 Identification No.) |
|
|
|
|
1114 Avenue of the Americas, New York, New York |
10036 |
Registrant's telephone number, including area code (212) 704-1200
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 by check mark whether the Registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act) 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 30, 2004: 422,130,934 shares.
THE INTERPUBLIC GROUP OF COMPANIES, INC. AND SUBSIDIARIES
I N D E X
PART I. FINANCIAL INFORMATION
|
|
|
Page No. |
||
|
Item 1. |
Financial Statements |
|
||
|
|
|
|
||
|
|
Consolidated Statement of Operations |
3 |
||
|
|
|
Three months ended June 30, 2004 |
|
|
|
|
|
and 2003 (unaudited) |
|
|
|
|
|
|
||
|
|
Consolidated Statement of Operations |
4 |
||
|
|
|
Six months ended June 30, 2004 |
|
|
|
|
|
and 2003 (unaudited) |
|
|
|
|
|
|
||
|
|
Consolidated Balance Sheet |
5 |
||
|
|
|
June 30, 2004 and |
|
|
|
|
|
December 31, 2003 (unaudited) |
|
|
|
|
|
|
||
|
|
Consolidated Statement of Comprehensive Income (Loss) |
7 |
||
|
|
|
Three months ended June 30, 2004 |
|
|
|
|
|
and 2003 (unaudited) |
|
|
|
|
|
|
||
|
|
Consolidated Statement of Comprehensive Income (Loss) |
8 |
||
|
|
|
Six months ended June 30, 2004 |
|
|
|
|
|
and 2003 (unaudited) |
|
|
|
|
|
|
||
|
|
Consolidated Statement of Cash Flows |
9 |
||
|
|
|
Six months ended June 30, 2004 |
|
|
|
|
|
and 2003 (unaudited) |
|
|
|
|
|
|
||
|
|
Notes to Consolidated Financial Statements (unaudited) |
10 |
||
|
|
|
|
||
|
Item 2. |
Management's Discussion and Analysis of |
25 |
||
|
|
|
Financial Condition and Results of Operations |
|
|
|
|
|
|
||
|
Item 3. |
Quantitative and Qualitative Disclosures about Market Risk |
43 |
||
|
|
|
|
||
|
Item 4. |
Controls and Procedures |
44 |
||
PART II. OTHER INFORMATION
|
Item 1. |
Legal Proceedings |
46 |
|
|
|
|
|
Item 2. |
Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities |
47 |
|
|
|
|
|
Item 4. |
Submission of Matters to a Vote of Securities Holders |
50 |
|
|
|
|
|
Item 6. |
Exhibits and Reports on Form 8-K |
51 |
|
|
|
|
|
SIGNATURES |
|
54 |
|
|
|
|
|
INDEX TO EXHIBITS |
55 |
|
|
PART I - FINANCIAL INFORMATION |
|||||||||
|
|
|||||||||
|
Item 1. Financial Statements |
|||||||||
|
|
|||||||||
|
THE INTERPUBLIC GROUP OF COMPANIES, INC. AND SUBSIDIARIES |
|||||||||
|
CONSOLIDATED STATEMENT OF OPERATIONS |
|||||||||
|
THREE MONTHS ENDED JUNE 30, |
|||||||||
|
(Amounts in Millions, Except Per Share Amounts) |
|||||||||
|
(Unaudited) |
|||||||||
|
|
2004 |
|
2003 |
||||||
|
REVENUE |
$ |
1,544.1 |
|
|
$ |
1,499.4 |
|
||
|
|
|
|
|
|
|
|
|
||
|
OPERATING EXPENSES: |
|
|
|
|
|
|
|
||
|
Salaries and related expenses |
|
893.8 |
|
|
|
878.4 |
|
||
|
Office and general expenses |
|
506.8 |
|
|
|
463.7 |
|
||
|
Restructuring charges |
|
2.0 |
|
|
|
94.4 |
|
||
|
Long-lived asset impairments |
|
3.0 |
|
|
|
11.0 |
|
||
|
Motorsports contract termination costs |
|
80.0 |
|
|
|
-- |
|
||
|
Total operating expenses |
|
1,485.6 |
|
|
|
1,447.5 |
|
||
|
|
|
|
|
|
|
|
|
||
|
OPERATING INCOME |
|
58.5 |
|
|
|
51.9 |
|
||
|
|
|
|
|
|
|
|
|
||
|
OTHER INCOME (EXPENSE): |
|
|
|
|
|
|
|
||
|
Interest expense |
|
(38.4 |
) |
|
|
(46.1 |
) |
||
|
Interest income |
|
10.4 |
|
|
|
10.2 |
|
||
|
Other income |
|
2.3 |
|
|
|
0.3 |
|
||
|
Investment impairments |
|
-- |
|
|
|
(9.8 |
) |
||
|
Total other expense |
|
(25.7 |
) |
|
|
(45.4 |
) |
||
|
|
|
|
|
|
|
|
|
||
|
INCOME before income taxes |
|
32.8 |
|
|
|
6.5 |
|
||
|
Income tax provision |
|
33.4 |
|
|
|
22.4 |
|
||
|
LOSS OF CONSOLIDATED COMPANIES |
|
(0.6 |
) |
|
|
(15.9 |
) |
||
|
|
|
|
|
|
|
|
|
||
|
Income applicable to minority interests |
|
(5.6 |
) |
|
|
(8.4 |
) |
||
|
Equity in net income of unconsolidated affiliates |
|
0.8 |
|
|
|
1.3 |
|
||
|
|
|
|
|
|
|
|
|
||
|
LOSS FROM CONTINUING OPERATIONS |
|
(5.4 |
) |
|
|
(23.0 |
) |
||
|
|
|
|
|
|
|
|
|
||
|
INCOME FROM DISCONTINUED OPERATIONS (NET OF TAX) |
|
-- |
|
|
|
9.5 |
|
||
|
|
|
|
|
|
|
|
|
||
|
NET lOSS |
|
(5.4 |
) |
|
|
(13.5 |
) |
||
|
|
|
|
|
|
|
|
|
||
|
Dividends on preferred stock |
|
5.0 |
|
|
|
-- |
|
||
|
|
|
|
|
|
|
|
|
||
|
NET LOSS AVAILABLE TO COMMON STOCKHOLDERS |
$ |
(10.4 |
) |
$ |
(13.5 |
) |
|||
|
|
|
|
|
|
|
|
|
||
|
Earnings (loss) per share of common stock: |
|
|
|
|
|
|
|
||
|
Basic: |
|
|
|
|
|
|
|
||
|
Continuing operations |
$ |
(0.03 |
) |
|
$ |
(0.06 |
) |
||
|
Discontinued operations |
-- |
0.02 |
|||||||
|
Total |
$ |
(0.03 |
) |
|
$ |
(0.04 |
) |
||
|
|
|
|
|
|
|
|
|
||
|
Diluted: |
|
|
|
|
|
|
|
||
|
Continuing operations |
$ |
(0.03 |
) |
|
$ |
(0.06 |
) |
||
|
Discontinued operations |
|
-- |
|
|
|
0.02 |
|
||
|
Total |
$ |
(0.03 |
) |
|
$ |
(0.04 |
) |
||
|
|
|
|
|
|
|
|
|
||
|
Weighted average common shares: |
|
|
|
|
|
|
|
||
|
Basic |
|
414.6 |
|
|
|
384.3 |
|
||
|
Diluted |
|
414.6 |
|
|
|
384.3 |
|
||
|
|
|||||||||
|
The accompanying notes are an integral part of these Consolidated Financial Statements. |
|||||||||
|
|
|||||||||
|
|
|||||||||
|
THE INTERPUBLIC GROUP OF COMPANIES, INC. AND SUBSIDIARIES |
|||||||||
|
CONSOLIDATED STATEMENT OF OPERATIONS |
|||||||||
|
SIX MONTHS ENDED JUNE 30, |
|||||||||
|
(Amounts in Millions, Except Per Share Amounts) |
|||||||||
|
(Unaudited) |
|||||||||
|
2004 |
2003 |
||||||||
|
REVENUE |
$ |
2,939.2 |
|
|
$ |
2,815.1 |
|
||
|
|
|
|
|
|
|
|
|
||
|
OPERATING EXPENSES: |
|
|
|
|
|
|
|
||
|
Salaries and related expenses |
|
1,767.8 |
|
|
|
1,733.1 |
|
||
|
Office and general expenses |
|
970.1 |
|
|
|
892.8 |
|
||
|
Restructuring charges |
|
64.6 |
|
|
|
94.4 |
|
||
|
Long-lived asset impairments |
8.6 |
22.1 |
|||||||
|
Motorsports contract termination costs |
80.0 |
-- |
|||||||
|
Total operating expenses |
|
2,891.1 |
|
|
|
2,742.4 |
|
||
|
|
|
|
|
|
|
|
|
||
|
OPERATING INCOME |
|
48.1 |
|
|
|
72.7 |
|
||
|
|
|
|
|
|
|
|
|
||
|
OTHER INCOME (EXPENSE): |
|
|
|
|
|
|
|
||
|
Interest expense |
|
(77.5 |
) |
|
|
(84.9 |
) |
||
|
Interest income |
|
20.1 |
|
|
|
18.1 |
|
||
|
Other income |
|
3.4 |
|
|
|
0.1 |
|
||
|
Investment impairments |
|
(3.2 |
) |
|
|
(12.5 |
) |
||
|
Total other expense |
|
(57.2 |
) |
|
|
(79.2 |
) |
||
|
|
|
|
|
|
|
|
|
||
|
LOSS BEFORE INCOME TAXES |
|
(9.1 |
) |
|
|
(6.5 |
) |
||
|
Income tax provision |
6.6 |
16.8 |
|||||||
|
LOSS OF CONSOLIDATED COMPANIES |
|
(15.7 |
) |
|
|
(23.3 |
) |
||
|
|
|
|
|
|
|
|
|
||
|
Income applicable to minority interests |
|
(8.0 |
) |
|
|
(9.0 |
) |
||
|
Equity in net income (loss) of unconsolidated affiliates |
|
1.4 |
|
|
|
(1.9 |
) |
||
|
LOSS FROM CONTINUING OPERATIONS |
|
(22.3 |
) |
|
|
(34.2 |
) |
||
|
|
|
|
|
|
|
|
|
||
|
INCOME FROM DISCONTINUED OPERATIONS (NET OF TAX) |
|
-- |
|
|
|
12.1 |
|
||
|
NET lOSS |
|
(22.3 |
) |
|
|
(22.1 |
) |
||
|
|
|
|
|
|
|
|
|
||
|
Dividends on preferred stock |
|
9.8 |
|
|
|
-- |
|
||
|
|
|
|
|
|
|
|
|
||
|
NET LOSS AVAILABLE TO COMMON STOCKHOLDERS |
$ |
(32.1 |
) |
|
$ |
(22.1 |
) |
||
|
|
|
|
|
|
|
|
|
||
|
Earnings (loss) per share of common stock: |
|
|
|
|
|
|
|
||
|
Basic: |
|
|
|
|
|
|
|
||
|
Continuing operations |
$ |
(0.08 |
) |
|
$ |
(0.09 |
) |
||
|
Discontinued operations |
-- |
0.03 |
|||||||
|
Total |
$ |
(0.08 |
) |
|
$ |
(0.06 |
) |
||
|
Diluted: |
|
|
|
|
|
|
|
||
|
Continuing operations |
$ |
(0.08 |
) |
|
$ |
(0.09 |
) |
||
|
Discontinued operations |
|
-- |
|
|
|
0.03 |
|
||
|
Total |
$ |
(0.08 |
) |
|
$ |
(0.06 |
) |
||
|
Weighted average common shares: |
|
|
|
|
|
|
|
||
|
Basic |
|
413.9 |
|
|
|
383.1 |
|
||
|
Diluted |
413.9 |
383.1 |
|||||||
|
|
|||||||||
|
The accompanying notes are an integral part of these Consolidated Financial Statements. |
|||||||||
|
THE INTERPUBLIC GROUP OF COMPANIES, INC. AND SUBSIDIARIES |
|||||||
|
CONSOLIDATED BALANCE SHEET |
|||||||
|
(Amounts in Millions, Except Per Share Amounts) |
|||||||
|
|
|||||||
|
(Unaudited) |
|||||||
|
|
|
|
|
||||
|
|
June 30, |
|
December 31, |
||||
|
|
2004 |
|
2003 |
||||
|
CURRENT ASSETS: |
|
|
|
||||
|
Cash and cash equivalents |
$ |
1,434.3 |
|
|
$ |
2,005.7 |
|
|
Accounts receivable (net of allowance for doubtful |
|
4,937.7 |
|
|
|
4,632.4 |
|
|
Expenditures billable to clients |
|
330.9 |
|
|
|
242.1 |
|
|
Deferred income taxes |
|
201.4 |
|
|
|
201.7 |
|
|
Prepaid expenses and other current assets |
|
223.0 |
|
|
|
267.8 |
|
|
|
|
|
|
|
|
|
|
|
Total current assets |
|
7,127.3 |
|
|
|
7,349.7 |
|
|
|
|
|
|
|
|
|
|
|
FIXED ASSETS, AT COST: |
|
|
|
|
|
|
|
|
Land and buildings |
|
105.7 |
|
|
|
108.1 |
|
|
Furniture and equipment |
|
1,008.8 |
|
|
|
1,024.9 |
|
|
Leasehold improvements |
|
476.6 |
|
|
|
516.0 |
|
|
|
|
1,591.1 |
|
|
|
1,649.0 |
|
|
Less: accumulated depreciation |
|
(948.1 |
) |
|
|
(991.9 |
) |
|
|
|
|
|
|
|
|
|
|
Total fixed assets |
|
643.0 |
|
|
|
657.1 |
|
|
|
|
|
|
|
|
|
|
|
OTHER ASSETS: |
|
|
|
|
|
|
|
|
Investments |
235.0 |
248.6 |
|||||
|
Deferred income taxes |
|
404.1 |
|
|
|
344.5 |
|
|
Other assets |
|
279.0 |
|
|
|
282.0 |
|
|
Goodwill |
|
3,428.9 |
|
|
|
3,310.6 |
|
|
Other intangible assets (net of accumulated |
|
|
|
|
|
|
|
|
amortization: 2004-$24.2; 2003-$27.2) |
|
38.9 |
|
|
|
42.0 |
|
|
|
|
|
|
|
|
|
|
|
Total other assets |
|
4,385.9 |
|
|
|
4,227.7 |
|
|
|
|
|
|
|
|
|
|
|
TOTAL ASSETS |
$ |
12,156.2 |
|
|
$ |
12,234.5 |
|
|
|
|||||||
|
|
|||||||
|
The accompanying notes are an integral part of these Consolidated Financial Statements. |
|||||||
|
THE INTERPUBLIC GROUP OF COMPANIES, INC. AND SUBSIDIARIES |
|||||||
|
CONSOLIDATED BALANCE SHEET |
|||||||
|
(Amounts in Millions, Except Per Share Amounts) |
|||||||
|
|
|||||||
|
LIABILITIES AND STOCKHOLDERS' EQUITY |
|||||||
|
(Unaudited) |
|||||||
|
|
|
|
|
||||
|
|
June 30, |
|
December 31, |
||||
|
2004 |
|
2003 |
|||||
|
CURRENT LIABILITIES: |
|
|
|
||||
|
Accounts payable |
$ |
5,724.4 |
|
|
$ |
5,299.2 |
|
|
Accrued expenses |
|
838.5 |
|
|
|
1,042.7 |
|
|
Loans payable |
|
34.8 |
|
|
|
38.5 |
|
|
Convertible subordinated notes |
|
-- |
|
|
|
244.1 |
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities |
|
6,597.7 |
|
|
|
6,624.5 |
|
|
|
|
|
|
|
|
|
|
|
NON-CURRENT LIABILITIES: |
|
|
|
|
|
|
|
|
Long-term debt |
|
1,047.1 |
|
|
|
1,054.2 |
|
|
Convertible subordinated notes |
|
342.2 |
|
|
|
337.5 |
|
|
Convertible senior notes |
|
800.0 |
|
|
|
800.0 |
|
|
Deferred compensation |
|
449.0 |
|
|
|
488.3 |
|
|
Accrued postretirement benefits |
|
52.4 |
|
|
|
51.5 |
|
|
Other non-current liabilities |
|
249.1 |
|
|
|
202.6 |
|
|
Minority interests in consolidated subsidiaries |
|
56.3 |
|
|
|
70.0 |
|
|
Total non-current liabilities |
|
2,996.1 |
|
|
|
3,004.1 |
|
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies (Note 14) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS' EQUITY: |
|
|
|
|
|
|
|
|
Preferred stock, no par value, |
|
|
|
|
|
|
|
|
shares authorized: 20.0, shares issued: 2004 -7.5; 2003 - 7.5 |
|
373.7 |
|
|
|
373.7 |
|
|
Common stock, $0.10 par value, |
|
|
|
|
|
|
|
|
shares authorized: 800.0, |
|
|
|
|
|
|
|
|
shares issued: 2004 - 422.4; 2003 - 418.4 |
|
42.2 |
|
|
|
41.8 |
|
|
Additional paid-in capital |
2,129.1 |
2,075.1 |
|||||
|
Retained earnings |
|
374.2 |
|
|
|
406.3 |
|
|
Accumulated other comprehensive loss, net of tax |
|
(257.4 |
) |
|
|
(215.1 |
) |
|
Treasury stock, at cost: 2004 - 0.4 shares; 2003 - 0.3 shares |
|
(14.0 |
) |
|
|
(11.3 |
) |
|
Unamortized deferred compensation |
|
(85.4 |
) |
|
|
(64.6 |
) |
|
|
|
|
|
|
|
|
|
|
Total stockholders' equity |
|
2,562.4 |
|
|
|
2,605.9 |
|
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY |
$ |
12,156.2 |
|
|
$ |
12,234.5 |
|
|
|
|||||||
|
|
|||||||
|
The accompanying notes are an integral part of these Consolidated Financial Statements. |
|||||||
|
THE INTERPUBLIC GROUP OF COMPANIES, INC. AND SUBSIDIARIES |
|||||||
|
|
|||||||
|
|
|||||||
|
|
2004 |
|
2003 |
||||
|
Net Loss |
$ |
(5.4 |
) |
|
$ |
(13.5 |
) |
|
Foreign Currency Translation Adjustments |
(20.8 |
) |
47.0 |
||||
|
Adjustment for Minimum Pension Liability |
|
|
|
|
|
|
|
|
Adjustment for minimum pension liability |
|
-- |
|
|
|
(0.5 |
) |
|
Tax benefit |
|
-- |
|
|
|
-- |
|
|
Adjustment for Minimum Pension Liability |
|
-- |
|
|
|
(0.5 |
) |
|
Unrealized Holding Gains (Losses) on Securities |
|
|
|
|
|
|
|
|
Unrealized holding gains arising in the current period |
|
-- |
|
|
|
5.3 |
|
|
Tax expense |
|
-- |
|
|
|
(2.2 |
) |
|
Unrealized holding losses arising in the current period |
|
(0.6 |
) |
|
|
-- |
|
|
Tax benefit |
|
0.3 |
|
|
|
-- |
|
|
Reclassification of loss to net loss |
|
-- |
|
|
|
-- |
|
|
Tax benefit |
|
-- |
|
|
|
-- |
|
|
Unrealized Holding Gains (Losses) on Securities |
|
(0.3 |
) |
|
|
3.1 |
|
|
|
|
|
|
|
|
|
|
|
Comprehensive - Income (Loss) |
$ |
(26.5 |
) |
|
$ |
36.1 |
|
|
|
|||||||
|
|
|||||||
|
The accompanying notes are an integral part of these Consolidated Financial Statements. |
|||||||
|
THE INTERPUBLIC GROUP OF COMPANIES, INC. AND SUBSIDIARIES |
|||||||
|
|
|||||||
|
|
|||||||
|
|
2004 |
|
2003 |
||||
|
Net Loss |
$ |
(22.3 |
) |
|
$ |
(22.1 |
) |
|
Foreign Currency Translation Adjustments |
(42.6 |
) |
76.7 |
||||
|
Adjustment for Minimum Pension Liability |
|
|
|
|
|
|
|
|
Adjustment for minimum pension liability |
|
(3.7 |
) </ | ||||