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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-Q
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|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2000
OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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Commission File Number: 1-6686
THE INTERPUBLIC GROUP OF COMPANIES, INC.
(Exact name of Registrant as specified in its charter)
Delaware 13-1024020
- ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) 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
--------------
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
October 31, 2000: 307,735,360 shares.
THE INTERPUBLIC GROUP OF COMPANIES, INC. AND ITS SUBSIDIARIES
I N D E X
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheet
September 30, 2000 (unaudited) and
December 31, 1999
Consolidated Income Statement
Three months ended September 30, 2000
and 1999 (unaudited)
Consolidated Income Statement
Nine months ended September 30, 2000
and 1999 (unaudited)
Consolidated Statement of Comprehensive Income
Three months ended September 30, 2000
and 1999 (unaudited)
Consolidated Statement of Comprehensive Income
Nine months ended September 30, 2000
and 1999 (unaudited)
Consolidated Statement of Cash Flows
Nine months ended September 30, 2000
and 1999 (unaudited)
Notes to Consolidated Financial Statements (unaudited)
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative disclosures about Market Risk
PART II. OTHER INFORMATION
Item 2. Changes in Securities
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
INDEX TO EXHIBITS
PART I - FINANCIAL INFORMATION
Item 1
THE INTERPUBLIC GROUP OF COMPANIES, INC. AND ITS SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(Dollars in Thousands)
ASSETS
September 30, December 31,
2000 1999
(unaudited)
------------ ------------
CURRENT ASSETS:
Cash and cash equivalents (includes
certificates of deposit: 2000-$72,593;
1999-$150,343) $ 583,319 $1,006,011
Marketable securities 42,893 36,765
Receivables (net of allowance for doubtful
accounts: 2000-$68,166; 1999-$60,505) 4,377,951 4,401,704
Expenditures billable to clients 452,155 332,833
Prepaid expenses and other current assets 194,341 146,019
--------------------------
Total current assets 5,650,659 5,923,332
--------------------------
OTHER ASSETS:
Investment in unconsolidated affiliates 86,304 61,987
Deferred taxes on income 74,853 --
Other investments and miscellaneous assets 607,544 718,939
--------------------------
Total other assets 768,701 780,926
--------------------------
FIXED ASSETS, at cost:
Land and buildings 151,787 164,678
Furniture and equipment 847,614 777,368
--------------------------
999,401 942,046
Less: accumulated depreciation (551,852) (504,371)
--------------------------
447,549 437,675
Unamortized leasehold improvements 163,394 145,071
--------------------------
Total fixed assets 610,943 582,746
--------------------------
INTANGIBLE ASSETS (net of accumulated
amortization: 2000-$684,892; 1999-$607,417) 2,536,326 1,879,600
--------------------------
TOTAL ASSETS $9,566,629 $9,166,604
==========================
THE INTERPUBLIC GROUP OF COMPANIES, INC. AND ITS SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(Dollars in Thousands Except Per Share Data)
LIABILITIES AND STOCKHOLDERS' EQUITY
September 30, December 31,
2000 1999
(unaudited)
------------ ------------
CURRENT LIABILITIES:
Payable to banks $ 445,736 $ 262,397
Accounts payable 4,145,796 4,568,343
Accrued expenses 716,853 761,210
Accrued income taxes 156,455 160,484
--------------------------
Total current liabilities 5,464,840 5,752,434
--------------------------
NONCURRENT LIABILITIES:
Long-term debt 1,128,218 524,183
Convertible subordinated debentures
and notes 529,375 518,490
Deferred compensation and reserve
for termination allowances 369,936 344,999
Deferred taxes on income -- 44,744
Accrued postretirement benefits 50,701 50,226
Other noncurrent liabilities 78,898 87,548
Minority interests in consolidated
subsidiaries 77,397 81,612
--------------------------
Total noncurrent liabilities 2,234,525 1,651,802
--------------------------
STOCKHOLDERS' EQUITY:
Preferred Stock, no par value
shares authorized: 20,000,000
shares issued: none
Common Stock, $.10 par value
shares authorized: 550,000,000
shares issued:
2000 - 313,065,819;
1999 - 309,996,727 31,307 31,000
Additional paid-in capital 908,295 784,646
Retained earnings 1,545,090 1,389,971
Accumulated other comprehensive
loss, net of tax (331,853) (76,695)
--------------------------
2,152,839 2,128,922
Less:
Treasury stock, at cost:
2000 - 5,593,450 shares;
1999 - 8,909,904 shares 177,670 289,519
Unamortized expense of restricted
stock grants 107,905 77,035
--------------------------
Total stockholders' equity 1,867,264 1,762,368
--------------------------
Commitments and contingencies
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $9,566,629 $9,166,604
===========================
All prior periods have been restated to reflect the aggregate effect of
acquisitions accounted for as poolings of interests. (See Note (a))
The accompanying notes are an integral part of these consolidated financial
statements.
THE INTERPUBLIC GROUP OF COMPANIES, INC. AND ITS SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
THREE MONTHS ENDED SEPTEMBER 30
(Amounts in Thousands Except Per Share Data)
(unaudited)
2000 1999
---- ----
Revenue $ 1,320,439 $ 1,151,406
----------- -----------
Salaries and related expenses 749,875 658,227
Office and general expenses 374,301 340,982
Amortization of intangible assets 30,101 21,284
Restructuring and other
merger related costs 27,305 -
----------- -----------
Total operating expenses 1,181,582 1,020,493
----------- -----------
Income from operations 138,857 130,913
Interest expense (32,310) (21,692)
Other income, net 16,415 14,963
----------- -----------
Income before provision for income taxes 122,962 124,184
Provision for income taxes 52,570 52,005
----------- -----------
Income of consolidated companies 70,392 72,179
Income applicable to minority interests (10,012) (6,288)
Equity in net income of unconsolidated
affiliates 1,480 1,884
----------- -----------
Net income $ 61,860 $ 67,775
=========== ===========
Weighted average shares:
Basic 300,004 292,762
Diluted 309,033 303,373
Earnings Per Share:
Basic $ .21 $ .23
Diluted $ .20 $ .22
Dividends per share $ .095 $ .085
All prior periods have been restated to reflect the aggregate effect of
acquisitions accounted for as poolings of interests. (See Note (a))
The accompanying notes are an integral part of these consolidated financial
statements.
THE INTERPUBLIC GROUP OF COMPANIES, INC. AND ITS SUBSIDIARIES
CONSOLIDATED INCOME STATEMENT
NINE MONTHS ENDED SEPTEMBER 30
(Dollars in Thousands Except Per Share Data)
(unaudited)
2000 1999
---- ----
Revenue $ 3,936,842 $ 3,404,953
----------- -----------
Salaries and related expenses 2,157,050 1,866,000
Office and general expenses 1,131,183 1,007,388
Amortization of intangible assets 77,475 57,602
Restructuring and other
merger related costs 116,131 -
----------- -----------
Total operating expenses 3,481,839 2,930,990
----------- -----------
Income from operations 455,003 473,963
Interest expense (74,726) (59,704)
Other income, net 62,316 56,800
----------- -----------
Income before provision for income taxes 442,593 471,059
Provision for income taxes 188,516 191,572
----------- -----------
Income of consolidated companies 254,077 279,487
Income applicable to minority interests (25,721) (19,044)
Equity in net income of unconsolidated
affiliates 7,638 6,051
----------- -----------
Net income $ 235,994 $ 266,494
=========== ===========
Weighted average shares:
Basic 296,113 291,832
Diluted 305,938 309,290
Earnings Per Share:
Basic $ .80 $ .91
Diluted $ .77 $ .88
Dividends per share $ .275 $ .245
All prior periods have been restated to reflect the aggregate effect of
acquisitions accounted for as poolings of interests. (See Note (a))
The accompanying notes are an integral part of these consolidated financial
statements.
THE INTERPUBLIC GROUP OF COMPANIES, INC. AND ITS SUBSIDIARIES
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (LOSS)
THREE MONTHS ENDED SEPTEMBER 30
(Dollars in Thousands)
(unaudited)
2000 1999
---- ----
Net Income $ 61,860 $ 67,775
-------- --------
Other Comprehensive Income (Loss), net of tax:
Foreign Currency Translation Adjustments (36,296) 15,908
Net Unrealized Gain on Securities 2,305 25,293
-------- --------
Other Comprehensive Income (Loss) (33,991) 41,201
-------- --------
Comprehensive Income $ 27,869 $108,976
======== ========
All prior periods have been restated to reflect the aggregate effect of
acquisitions accounted for as poolings of interests. (See Note (a))
The accompanying notes are an integral part of these consolidated financial
statements.
THE INTERPUBLIC GROUP OF COMPANIES, INC. AND ITS SUBSIDIARIES
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (LOSS)
NINE MONTHS ENDED SEPTEMBER 30
(Dollars in Thousands)
(unaudited)
2000 1999
---- ----
Net Income $235,994 $266,494
-------- --------
Other Comprehensive Income (Loss), net of tax:
Foreign Currency Translation Adjustments (112,039) (70,154)
Net Unrealized Gain (Loss) on Securities (143,119) 24,614
-------- --------
Other Comprehensive Loss (255,158) (45,540)
-------- --------
Comprehensive Income (Loss) $ (19,164) $ 220,954
========= ========
All prior periods have been restated to reflect the aggregate effect of
acquisitions accounted for as poolings of interests. (See Note (a))
The accompanying notes are an integral part of these consolidated financial
statements.
THE INTERPUBLIC GROUP OF COMPANIES, INC. AND ITS SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30
(Dollars in Thousands)
(unaudited)
2000 1999
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 235,994 $ 266,494
Adjustments to reconcile net income to cash (used in)
provided by operating activities:
Depreciation and amortization of fixed assets 109,513 86,335
Amortization of intangible assets 77,475 57,602
Amortization of restricted stock awards 27,197 19,067
Equity in net income of unconsolidated
affiliates (7,638) (6,051)
Income applicable to minority interests 25,721 19,044
Translation losses 1,328 1,183
Net gain from sale of investments (12,275) (21,734)
Restructuring charges, non cash 32,100 --
Changes in assets and liabilities, net of acquisitions:
Receivables (59,712) (379,428)
Expenditures billable to clients (111,236) (94,711)
Prepaid expenses and other assets (49,661) (20,010)
Accounts payable and other liabilities (448,045) 131,681
Accrued income taxes 3,856 7,570
Deferred income taxes (20,813) (7,881)
Deferred compensation and reserve for
termination allowances 34,391 11,202
---------- ---------
Net cash (used in) provided by operating activities (161,805) 70,363
CASH FLOWS FROM INVESTING ACTIVITIES: ---------- ---------
Acquisitions (439,229) (182,206)
Proceeds from sale of assets 682 --
Proceeds from sale of investments 13,460 39,734
Capital expenditures (148,818) (101,456)
Net purchases of marketable securities (10,630) (17,174)
Other investments and miscellaneous assets (163,141) 10,358
Investments in unconsolidated affiliates (29,444) (8,251)
---------- ---------
Net cash used in investing activities (777,120) (258,995)
CASH FLOWS FROM FINANCING ACTIVITIES: ---------- ---------
Increase in short-term borrowings 159,570 41,488
Proceeds from long-term debt 859,850 405,412
Payments of long-term debt (222,473) (56,804)
Treasury stock acquired (182,040) (209,024)
Issuance of common stock 36,192 54,295
Cash dividends - pooled (420) (1,543)
Cash dividends - Interpublic (80,436) (67,534)
---------- ---------
Net cash provided by financing activities 570,243 166,290
---------- ---------
Effect of exchange rates on cash and cash
equivalents (54,010) (31,183)
---------- ---------
Decrease in cash and cash equivalents (422,692) (53,525)
Cash and cash equivalents at
beginning of year 1,006,011 780,430
---------- ---------
Cash and cash equivalents at end of period $ 583,319 $ 726,905
========== =========
All prior periods have been restated to reflect the aggregate effect of
acquisitions accounted for as poolings of interests. (See Note (a))
The accompanying notes are an integral part of these consolidated financial
statements.
THE INTERPUBLIC GROUP OF COMPANIES, INC. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Consolidated Financial Statements
(a) In the opinion of management, the consolidated balance sheet as of
September 30, 2000, the consolidated income statements for the three
months and nine months ended September 30, 2000 and 1999, the
consolidated statement of comprehensive income for the three months
and nine months ended September 30, 2000 and 1999, and the
consolidated statement of cash flows for the nine months ended
September 30, 2000 and 1999, contain all adjustments (which include
only normal recurring adjustments) necessary to present fairly the
financial position, results of operations and cash flows at September
30, 2000 and for all periods presented. Certain information and
footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles
have been omitted. It is suggested that these consolidated financial
statements be read in conjunction with the consolidated financial
statements and notes thereto included in The Interpublic Group of
Companies, Inc.'s (the "Company") December 31, 1999 annual report to
stockholders and the consolidated financial statements and notes
thereto included in the Company's Current Report on Form 8-K dated
September 15, 2000.
The Company's consolidated financial statements, including the related
notes, have been restated for the prior periods presented to include
the results of operations, financial position and cash flows of NFO
Worldwide, Inc. ("NFO"). (See Note (b)). Additionally, the results of
several other recent acquisitions, all of which have been accounted
for as poolings of interests, have been included in the restated
financial statements. Other than NFO, none of the acquisitions was
individually, or in aggregate, material.
The accompanying income statements have been prepared in a format
different than that used in the originally filed Form 10-Q for the
quarterly period ended September 30, 1999. The accompanying financial
statements include the line - "Income from operations". Amounts
previously included in "Other income, net" as part of "Gross Income"
are now included elsewhere in the Consolidated Statement of Income.
(b) In April 2000, the Company issued approximately 12.6 million shares of
its common stock in connection with the acquisition of NFO. The
acquisition has been accounted for as a pooling of interests.
(c) During the third quarter, the Company recorded pre-tax restructuring
and other merger related costs of $27.3 million ($17.2 million net of
tax). For the nine months ended September 30, 2000, the Company
recorded pre-tax restructuring and other merger related costs of
$116.1 million ($72.9 million net of tax). Of the total pre-tax
restructuring and other merger related costs, cash charges represented
$14.8 million and $84 million for the three months and nine months
ended September 30, 2000, respectively. The key components of the
charge were the costs associated with the restructuring of Lowe Lintas
& Partners Worldwide. The remaining costs relate principally to
transaction and other merger related costs arising from the previously
announced merger with NFO.
Lowe Lintas & Partners
-----------------------
In October 1999, the Company announced the merger of two of its
advertising networks. The networks affected, Lowe & Partners Worldwide
and Ammirati Puris Lintas, were combined to form a new agency
network called Lowe Lintas & Partners Worldwide. The merger involved
the consolidation of operations in Lowe Lintas agencies in
approximately 24 cities in 22 countries around the world. The newly
merged agency network has offices in over 80 countries around the
world. As of September 30, 2000, all restructuring activities have
been completed.
A summary of the components of the reserve for restructuring and other
merger related costs for Lowe Lintas is as follows:
(Dollars in millions)
Year to Date September 30, 2000
---------------------------------
Balance Expense Cash Asset Balance
at 12/31/99 recognized Paid Write-offs at 9/30/00
----------- ------------- ---- ---------- ----------
TOTAL BY TYPE
Severance and
termination costs $43.6 $32.0 $24.6 -- $51.0
Fixed asset write-offs 11.1 14.2 -- 25.3 --
Lease termination costs 3.8 21.1 7.6 -- 17.3
Investment write-offs
and other 23.4 20.5 6.4 37.5 --
--------------------------------------------------------------
Total $81.9 $87.8 $38.6 $62.8 $68.3
==============================================================
The severance and termination costs recorded in 2000 relate to
approximately 360 employees who have been terminated or notified that
they will be terminated. The employee groups affected include
management, administrative, account management, creative and media
production personnel, principally in the U.S. and several European
countries.
The fixed asset write-offs relate largely to the abandonment of
leasehold improvements as part of the merger. The amount recognized in
2000 relates to fixed asset write-offs in 4 offices, the largest of
which is in the U.K.
Lease termination costs relate to the offices vacated as part of the
merger. The lease terminations are substantially complete, with the
cash portion to be paid out over a period of up to five years.
The investment write-offs relate to the loss on sale or closing of
certain business units. In 2000, $12.7 million of investment
write-offs has been recorded, the majority of which results from the
decision to sell or abandon 3 businesses located in Asia and Europe.
In the aggregate, the businesses being sold or abandoned represent an
immaterial portion of the revenue and operations of Lowe Lintas &
Partners. The write-off amount was computed based upon the difference
between the estimated sales proceeds (if any) and the carrying value
of the related assets.
NFO and Other Merger Related Costs
----------------------------------
In addition to the restructuring and other merger related costs noted
above, additional charges, substantially all of which were cash costs,
were recorded through September 30, 2000. These costs relate
principally to the non-recurring transaction and other merger related
costs arising from the recently completed acquisition of NFO. (See
Note (b)).
(d) In addition to the acquisition mentioned in (b), the Company has made
several other acquisitions in 2000, including Nationwide Advertising
Services, Waylon Promotions, Inc. and substantial assets of the
Communications Division of Caribiner International, Inc. The
acquisitions have been accounted for as purchases.
(e) On June 27, 2000, the Company entered into a syndicated multi-currency
credit agreement under which a total of $750 million may be borrowed;
$375 million may be borrowed under a 364-day facility and $375 million
under a five-year facility. The facilities bear interest at variable
rates based on either LIBOR or a bank's base rates, at the Company's
option. As of September 30, 2000, approximately $534 million had been
borrowed under the facilities. The weighted-average interest rate on
the borrowings at September 30, 2000 was 6.4%. The proceeds from the
syndicated credit agreement were used to refinance borrowings and for
general corporate purposes including acquisitions and other inv-
estments. Some of the pre-existing borrowing facilities were
subsequently terminated.
On August 25, 2000, the Company entered into a revolving credit
facility under which up to $250 million may be borrowed. The facility
expires on November 30, 2000, and bears interest at variable rates
based on either LIBOR, a bank's base rates or money market rates, at
the Company's option. The Company used the proceeds to refinance
borrowings and for general corporate purposes, including acquisitions
and other investments.
On October 20, 2000, the Company completed the issuance and sale of
$500 million principal amount of senior unsecured notes due 2005. The
notes bear an interest rate of 7.875% per annum. The Company used the
net proceeds of approximately $496 million from the sale of the notes
to repay outstanding indebtedness under its credit facilities.
Accordingly, certain short-term borrowings have been reclassified as
long-term.
(f) In June 1998, the Financial Accounting Standards Board issued
Statement No. 133, "Accounting for Derivative Instruments and Hedging
Activities" ("SFAS No. 133"), which sets out the required accounting
treatment for derivatives and hedging activities. In June 1999, the
Financial Accounting Standards Board issued Statement No. 137,
"Accounting for Derivative Instruments and Hedging Activities -
Deferral of the Effective Date of FASB Statement No. 133", which
delays implementation of SFAS No. 133 until fiscal years beginning
after June 15, 2000. In June 2000, the Financial Accounting Standards
Board issued Statement No. 138, "Accounting for Certain Derivative
Instruments and Certain Hedging Activities", which provides additional
guidance related to accounting for derivative instruments and hedging
activities as addressed by SFAS No. 133. The Company does not believe
that the effect of adopting SFAS No. 133 and SFAS No. 138 will be
material to its financial condition or results of operations.
Item 2
THE INTERPUBLIC GROUP OF COMPANIES, INC. AND ITS SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
As discussed in Note (b), the Company acquired NFO Worldwide, Inc. ("NFO"), a
leading provider of research based marketing information and counsel to the
business community, in a transaction accounted for as a pooling of interests in
April 2000. The Company's consolidated financial statements and other financial
information for prior periods have been restated to reflect the effect of the
NFO pooling and the results of several other acquisitions, which have been
accounted for as poolings of interests. The following discussion relates to the
combined results of the Company after giving effect to the pooled companies.
Three Months Ended September 30, 2000 Compared to Three Months Ended September
- ------------------------------------------------------------------------------
30, 1999
- --------
The Company reported net income of $61.9 million or $.20 diluted earnings per
share for the three months ended September 30, 2000. Excluding the impact of
restructuring and other merger related costs, which are discussed below, net
income was $79 million or $.26 diluted earnings per share, compared to $67.8
million or $.22 diluted earnings per share for the three months ended September
30, 1999.
The following table sets forth net income and earnings per share before and
after restructuring and other merger related costs:
(Dollars in thousands, except
per share data)
2000 1999
---- ----
Net income as reported $ 61,860 $ 67,775
Earnings per share:
Basic .21 .23
Diluted .20 .22
Net income before restructuring
and other merger related costs $ 79,026 $ 67,775
Earnings per share:
Basic .26 .23
Diluted .26 .22
Worldwide revenue for the three months ended September 30, 2000 increased $169
million, or 15%, to $1.3 billion compared to the same period in 1999. Domestic
revenue increased $142 million or 24% from 1999 levels. International revenue
increased $27 million or 5% during the third quarter of 2000 compared to 1999.
International revenue would have increased 18%, excluding the effect of the
strengthening of the U.S. dollar. The increase in worldwide revenue is a result
of both new business growth and growth from acquisitions. Organic revenue
growth, exclusive of acquisitions and currency effects, was 15% for the third
quarter of 2000 compared to the prior year quarter.
Revenue from specialized marketing communications services, which include media
buying, market research, sales promotion, direct marketing, public relations,
sports and event marketing, healthcare marketing and e-business consulting and
communications, comprised approximately 49% of the total worldwide revenue for
the three months ended September 30, 2000, compared to 46% for the prior year
quarter.
Income from operations was $139 million for the third quarter of 2000. Excluding
restructuring and other merger related costs, income from operations was $166
million for the third quarter of 2000, compared to $131 million for the third
quarter of 1999, an increase of 27%. Exclusive of acquisitions, currency
effects, and amortization of intangible assets, income from operations increased
24% for the third quarter of 2000 compared to the third quarter of 1999.
Worldwide operating expenses for the third quarter 2000, excluding restructuring
and other merger related costs were $1.2 billion, an increase of 13% over the
prior year quarter. Salaries and related expenses were $750 million or 57% of
revenue for the third quarter of 2000 as compared to $658 million or 57% of
revenue for the third quarter of 1999. Office and general expenses were $374
million for the third quarter of 2000 compared to $341 million for the third
quarter of 1999.
Interest expense was $32 million for the three months ended September 30, 2000,
compared to $22 million for the prior year quarter. The increase is primarily a
result of higher debt levels and higher interest rates in 2000.
Other income, net, which consists of interest income, investment income and net
gains from equity investments, increased slightly to $16 million for the third
quarter of 2000 as compared to $15 million for the third quarter of 1999.
The effective tax rate for the three months ended September 30, 2000 was 42.8%,
compared to 41.9% in 1999. The difference between the effective and statutory
rates is primarily due to state and local taxes, foreign withholding taxes on
dividends and nondeductible goodwill expense.
Nine Months Ended September 30, 2000 Compared to Nine Months Ended September 30,
- -------------------------------------------------------------------------------
1999
- ----
Net income was $236 million or $.77 diluted earnings per share for the nine
months ended September 30, 2000. Excluding the impact of restructuring and other
merger related costs, which are discussed below, net income was $308.9 million
or $1.01 diluted earnings per share, compared to $266.5 million or $.88 diluted
earnings per share for the nine months ended September 30, 1999.
The following table sets forth net income and earnings per share before and
after restructuring and other merger related costs:
(Dollars in thousands, except
per share data)
2000 1999
----- ----
Net income as reported $235,994 $266,494
Earnings per share:
Basic .80 .91
Diluted .77 .88
Net income before restructuring
and other merger related costs $308,931 $266,494
Earnings per share:
Basic 1.04 .91
Diluted 1.01 .88
Worldwide revenue for the nine months ended September 30, 2000, increased $532
million, or 16%, to $3.9 billion compared to the same period in 1999. Domestic
revenue increased $406 million or 23% during the first nine months of 2000
compared to 1999. International revenue increased $126 million or 8% during the
first nine months of 2000 compared to 1999. International revenue would have
increased 16%, excluding the effect of the strengthening of the U.S. dollar. The
increase in worldwide revenue is a result of both new business growth and growth
from acquisitions. Organic revenue growth, exclusive of acquisitions and
currency effects, was 14% for the first nine months of 2000 compared to the
prior year period.
Revenue from specialized marketing communications services, which include media
buying, market research, promotion sales, direct marketing, public relations,
sports and event marketing, healthcare marketing and e-business consulting and
communications, comprised approximately 47% of the total worldwide revenue for
the nine months ended September 30, 2000, compared to 45% for the first nine
months of 1999.
Income from operations was $455 million for the nine months ended September 30,
2000. Excluding restructuring and other merger related costs, income from
operations was $571 million for the first nine months of 2000, compared to $474
million for the first nine months of 1999, an increase of 21%. Exclusive of
acquisitions, currency effects and amortization of intangible assets, income
from operations increased 19% for the first nine months of 2000 compared to the
first nine months of 1999.
Worldwide operating expenses for the nine months ended September 30, 2000,
excluding restructuring and other merger related costs were $3.4 billion, an
increase of 15% over the prior year period. Salaries and related expenses were
$2.2 billion or 55% of revenue for the first nine months of 2000 as compared to
$1.9 billion or 55% of revenue for the first nine months of 1999. Office and
general expenses were $1.1 billion for the first nine months of 2000 compared to
$1.0 billion for the first nine months of 1999.
Interest expense was $74.7 million for the nine months ended September 30, 2000,
compared to $59.7 million for the prior year. The increase is primarily a result
of higher debt levels and higher interest rates in 2000.
Other income, net, which consists of interest income, investment income and net
gains from equity investments, was $62.3 million for the nine months ended
September 30, 2000, as compared to $56.8 million for the nine months ended
September 30, 1999, an increase of 10%.
The effective tax rate for the nine months ended September 30, 2000 was 42.6%,
compared to 40.7% in 1999. The difference between the effective and statutory
rates is primarily due to state and local taxes, foreign withholding taxes on
dividends and nondeductible goodwill expense.
Restructuring and Other Merger Related Costs
- --------------------------------------------
During the third quarter, the Company recorded pre-tax restructuring and other
merger related costs of $27.3 million ($17.2 million net of tax). For the nine
months ended September 30, 2000, the Company recorded pre-tax restructuring and
other merger related costs of $116.1 million ($72.9 million net of tax). Of the
total pre-tax restructuring and other merger related costs, cash charges
represented $14.8 million and $84 million for the three months and nine months
ended September 30, 2000, respectively. The key components of the charge were
the costs associated with the restructuring of Lowe Lintas & Partners Worldwide.
The remaining costs relate principally to transaction and merger related costs
arising from the previously announced merger with NFO.
Lowe Lintas & Partners
- ----------------------
In October 1999, the Company announced the merger of two of its advertising
networks. The networks affected, Lowe & Partners Worldwide and Ammirati Puris
Lintas, were combined to form a new agency network called Lowe Lintas & Partners
Worldwide. The merger involved the consolidation of operations in Lowe Lintas
agencies in approximately 24 cities in 22 countries around the world. The newly
merged agency network has offices in over 80 countries around the world. As of
September 30,2000, all restructuring activities have been completed.
The restructuring and other merger related costs for Lowe Lintas included $31
million in severance and termination costs, $14.2 million in fixed asset
write-offs, $21.1 million in lease termination costs and $21.5 million in
investment write-offs and other costs.
The severance and termination costs recorded 2000 relate to approximately 360
employees who have been terminated or notified that they will be terminated. The
employee groups affected include management, administrative, account management,
creative and media production personnel, principally in the U.S. and several
European countries.
The fixed asset write-offs relate largely to the abandonment of leasehold
improvements as part of the merger. The amount recognized in 2000 relates to
fixed asset write-offs in 4 offices, the largest of which is in the U.K. Lease
termination costs relate to the offices vacated as part of the merger.
The investment write-offs relate to the loss on sale or closing of certain
business units. In 2000, $12.7 million of investment write-offs has been
recorded, the majority of which results from the decision to sell or abandon 3
businesses located in Asia and Europe.
NFO and Other Merger Related Costs
In addition to the restructuring and other merger related costs noted above,
additional charges, substantially all of which were cash costs, were recorded
through September 30, 2000. These costs relate principally to the non-recurring
transaction and other merger related costs arising from the recently completed
acquisition of NFO. (See Note (b)).
LIQUIDITY AND CAPITAL RESOURCES
The ratio of current assets to current liabilities was approximately 1 to 1 at
September 30, 2000. Working capital increased by $15 million from December 31,
1999 to September 30, 2000. Total debt at September 30, 2000 was $2.1 billion,
an increase of $798 million from December 31, 1999. The increase in debt is
primarily attributable to the net effect of payments made for acquisitions and
other investments. Cash flow from operations and availability under existing
credit facilities will be the Company's primary source of working capital.
On June 27, 2000, the Company entered into a syndicated multi-currency credit
agreement under which a total of $750 million may be borrowed; $375 million may
be borrowed under a 364-day facility and $375 million under a five-year
facility. The facilities bear interest at variable rates based on either LIBOR
or a bank's base rates, at the Company's option. As of September 30, 2000,
approximately $534 million had been borrowed under the facilities. The
weighted-average interest rate on the borrowings at September 30, 2000 was 6.4%.
The proceeds from the syndicated credit agreement were used to refinance
borrowings and for general corporate purposes including acquisitions and other
investments. Some of the pre-existing borrowing facilities were subsequently
terminated.
On August 25, 2000, the Company entered into a revolving credit facility under
which up to $250 million may be borrowed. The facility expires on November 30,
2000, and bears interest at variable rates based on either LIBOR, a bank's base
rates or money market rates, at the Company's option. The Company used the
proceeds to refinance borrowings and for general corporate purposes, including
acquisitions and other investments.
On October 20, 2000, the Company completed the issuance and sale of $500 million
principal amount of senior unsecured notes due 2005. The notes bear an interest
rate of 7.875% per annum. The Company used the net proceeds of approximately
$496 million from the sale of the notes to repay outstanding indebtedness under
its credit facilities. Accordingly, certain short-term borrowings have been
reclassified as long-term.
Net cash used in operating activities was $162 million for the nine months ended
September 30, 2000. Net cash provided by operations was $70 million for the nine
months ended September 30, 1999. The principal use of the Company's working
capital is to provide for the operating needs of its advertising agencies, which
include payments for space or time purchased from various media on behalf of its
clients. The Company's practice is to bill and collect from its clients in
sufficient time to pay the amounts due media. Other uses of working capital
include the payment of cash dividends, acquisitions and capital expenditures. In
addition, during the first nine months of 2000, the Company acquired 3.5 million
shares of its own stock for the purpose of fulfilling the Company's obligations
under its various compensation plans.
OTHER MATTERS
Acquisitions
- ------------
In connection with the NFO acquisition completed on April 20, 2000, the Company
assumed approximately $180 million in debt. Additionally, the Company has made
several other acquisitions, including Nationwide Advertising Services, Waylon
Promotions, Inc. and substantial assets of the Communications Division of
Caribiner International, Inc. The acquisitions have been accounted for as
purchases.
Cautionary Statement
- --------------------
This Report on Form 10-Q (the "Report"), including Management's Discussion and
Analysis of Financial Condition and Results of Operations and the disclosure
under Item 5 of the Report, contains forward-looking statements. Statements that
are not historical facts, including statements about Interpublic's beliefs and
expectations, are forward-looking statements. These statements are based on
current plans, expectations, estimates and projections, and therefore you should
not place undue reliance 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, future events or otherwise.
Forward-looking statements involve inherent risks and uncertainties. Interpublic
cautions you that 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 and other
developments of the clients of Interpublic, developments from changes in the
regulatory and legal environment for advertising companies around the world,
Interpublic's ability to effectively integrate recent acquisitions and
Interpublic's ability to attract and retain key management personnel.
New Accounting Guidance
- -----------------------
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities" (SFAS No. 133), which had an initial adoption date of
January 1, 2000. In June 1999, the FASB postponed the adoption date of SFAS No.
133 until January 1, 2001. In June 2000, the FASB issued SFAS No. 138 which
provides additional guidance on SFAS No. 133. The Company does not believe the
effect of adopting SFAS No. 133 and SFAS No. 138 will be material to its
financial condition or results of operations.
Conversion to the Euro
- ----------------------
On January 1, 1999, certain member countries of the European Union established
fixed conversion rates between their existing currencies and the European
Union's common currency (the "Euro"). The Company conducts business in member
countries. The transition period for the introduction of the Euro is between
January 1, 1999, and June 30, 2002. The Company is addressing the issues
involved with the introduction of the Euro. The major important issues facing
the Company include: converting information technology systems; reassessing
currency risk; negotiating and amending contracts; and processing tax and
accounting records.
Based upon progress to date, the Company believes that use of the Euro will not
have a significant impact on the manner in which it conducts its business
affairs and processes its business and accounting records. Accordingly,
conversion to the Euro has not, and is not expected to have a material effect on
the Company's financial condition or results of operations.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
The Company's financial market risk arises from fluctuations in interest rates
and foreign currencies. Most of the Company's debt obligations are at fixed
interest rates. A 10% change in market interest rates would not have a material
effect on the Company's pre-tax earnings, cash flows or fair value. At September
30, 2000, the Company had an insignificant amount of foreign currency derivative
financial instruments in place. The Company does not hold any financial
instrument for trading purposes.
PART II - OTHER INFORMATION
Item 2(c). CHANGES IN SECURITIES
(1) On July 6, 2000, the Registrant issued an aggregate of 13,912
shares of its Common Stock, par value $.10 per share, (the "Interpublic Stock")
and paid $1,994,000 in cash to the former shareholder of a company which was
acquired in the second quarter of 2000. This represented the final deferred
payment of the purchase price. The shares of Interpublic Stock were valued at
$640,014 on the date of issuance.
The shares of Interpublic Stock were issued by the Registrant
without registration in reliance on Section 4(2) under the Securities Act of
1933, as amended (the "Securities Act"), based on the sophistication of the
acquired company's former stockholder.
(2) On July 17, 2000, a subsidiary of the Registrant acquired 100% of
the stock of a company in consideration for which the Registrant paid
$14,259,968.73 in cash and issued 226,128 shares of Interpublic Stock to the
shareholder of the company. The shares of Interpublic Stock had a market value
of $9,432,353 as of the date of issuance.
The shares of Interpublic Stock were issued by the Registrant
without registration in reliance on Section 4(2) under the Securities Act, based
on the sophistication of the company's stockholder.
(3) On July 24, 2000 the Registrant issued 10,580 shares of
Interpublic Stock and paid in $1,067,000 in cash to the former shareholders of a
company as part of the initial payment for the acquisition of 51% of the shares
of the company acquired in the third quarter of 2000. The shares of Interpublic
Stock were valued at $445,693 at the date of issuance.
The shares of Interpublic Stock were issued by the Registrant
without registration in an "off shore transaction" and solely to "non US
persons" in reliance on Rule 903 (b)(3) of Regulation S under the Securities
Act.
(4) On July 24, 2000, the Registrant paid $6,750,000 in cash and
issued a total of 53,412 shares of Interpublic Stock to shareholders of a
foreign company as downpayment of the purchase price for 100% of the capital
stock of the foreign company. The Interpublic Stock issued had a market value of
$2,250,000 on the date of issuance.
The shares of Interpublic Stock were issued by the Registrant
without registration in an "offshore transaction" and solely to "non-U.S.
persons" in reliance on Rule 903(b) (3) of Regulation S under the Securities
Act.
(5) On August 3, 2000, Registrant paid $1,788,493 in cash and on
August 7, 2000 issued 21,577 shares of Interpublic Stock to the former
shareholders of three related companies which were acquired in the Fourth
Quarter of 1999. This represented a deferred payment of the purchase price. The
shares of Interpublic Stock were valued at $871,171 on the date of issuance.
The shares of Interpublic Stock were issued by the Registrant
without registration in an "offshore transaction" and solely to "non-U.S.
persons" in reliance on Rule 903(b)(3) of Regulation S under the Securities Act.
(6) On August 7, 2000, Registrant paid $145,862 in cash and issued
3,415 shares of Interpublic Stock to the former shareholders of a company which
was acquired in the Second Quarter of 1997. This represented a deferred payment
of the purchase price. The shares of Interpublic Stock were valued at $137,881
on the date of issuance.
The shares of Interpublic Stock were issued by the Registrant
without registration in an "offshore transaction" and solely to "non-U.S.
persons" in reliance on Rule 903(b)(3) of Regulation S under the Securities Act.
(7) On August 14, 2000, Registrant paid $89,633 in cash and on August
15, 2000 issued 2,148 shares of Interpublic Stock to the former shareholders of
a company which was acquired in 1999. This represented a deferred payment of the
purchase price. The shares of Interpublic Stock were valued at $85,652 on the
date of issuance.
The shares of Interpublic Stock were issued by the Registrant
without registration in an "offshore transaction" and solely to "non-U.S.
persons" in reliance on Rule 903(b)(3) of Regulation S under the Securities Act.
(8) On August 14, 2000, the Registrant paid cash of $1,160,000 and
issued a total of 30,138 shares of Interpublic Stock to shareholders of a
foreign company as the downpayment of the purchase price for 70% of the capital
stock of the foreign company. The Interpublic stock issued had a market value of
$1,250,000 on the date of issuance.
The shares of Interpublic Stock were issued by the Registrant
without registration in an "offshore transaction" and solely to "non-U.S.
persons" in reliance on Rule 903(b) (3) of Regulation S under the Securities
Act.
(9) On August 22, 2000, the Registrant issued an aggregate of 43,013
shares of Interpublic Stock and paid $252,569 in cash to the former shareholder
of a company which was acquired in the second quarter of 1996. This represented
a deferred payment of the purchase price and an exercise of an option. The
shares of Interpublic Stock were valued at $1,737,801 on the date of issuance.
The shares of Interpublic Stock were issued by the Registrant
without registration in an "offshore transaction" and solely to "non-U.S.
persons" in reliance on Rule 903(b)(3) of Regulation S under the Securities Act.
(10) On August 23, 2000 the Registrant issued 68,611 shares of
Interpublic Stock and paid $6,650,000 in cash to the former shareholders of a
company as part of the initial payment for the remaining 51% of the shares of
the company 49% of which was acquired in the first quarter of 1997. The shares
of Interpublic Stock were valued at $2,994,703 at the date of issuance.
The shares of Interpublic Stock were issued by the Registrant
without registration in an "off shore transaction" and solely to "non US
persons" in reliance on Rule 903 (b)(3) of Regulation S under the Securities
Act.
(11) On December 10, 1999, the Registrant issued 10,587 shares of
Interpublic Stock, which shares were held in escrow pending the achievement of
certain financial goals of a company which was acquired by the Registrant in the
fourth quarter of 1999. Following the satisfaction of the financials goals by
said Company, the 10,587 shares of Interpublic Stock and $500,000 in cash were
paid to the former shareholders of said company on August 30, 2000. This
represented a contingent payment of the purchase price. The shares of
Interpublic Stock were valued at $500,000 on the date of issuance.
The shares of Interpublic Stock were issued by the Registrant
without registration in reliance on Section 4(2) under the Securities Act, based
on the sophistication of the acquired company's former stockholder.
(12) On August 31, 2000, the Registrant paid $2,967,000 in cash and
issued a total of 51,552 shares of Interpublic Stock to shareholders of a
foreign company as the downpayment of the purchase price for 100% of the capital
stock of the foreign company. The Interpublic stock issued had a market value of
$2,039,504 on the date of issuance.
The shares of Interpublic Stock were issued by the Registrant
without registration in an "offshore transaction" and solely to "non-U.S.
persons" in reliance on Rule 903(b) (3) of Regulation S under the Securities
Act.
(13) On August 31, 2000, a subsidiary of the Registrant acquired
certain assets of a domestic company in consideration for which the Registrant
paid $362,598 in cash to the company and issued 3,522 shares of Interpublic
Stock to certain members of the company who became employees of the subsidiary.
The shares of Interpublic Stock were valued at $137,402 on the date of issuance.
All the shares of Interpublic Stock that were issued were held
back with 1723 all to be released on August 31, 2001 and the remaining shares to
be released on August 31, 2002, provided that such members do not terminate
their respective employment agreements with the subsidiary.
The shares of Interpublic Stock were issued by the Registrant
without registration in reliance on Section 4(2) under the Securities Act, based
on the sophistication of the members of the company.
(14) On September 1, 2000, the Registrant issued 87,038 shares of
Interpublic Stock and paid $1,725,000 in cash to shareholders of a foreign
company, 20% of which was acquired by a subsidiary of the Registrant in the
third quarter of 1997. This represented an initial installment payment for the
purchase of an additional 20% of the foreign company. The shares of Interpublic
Stock were valued at $3,450,000 on the date of issuance.
The shares of Interpublic Stock were issued by the Registrant
without registration in an "offshore transaction" and solely to
"non-U.S.persons" in reliance on Rule 903(b)(3) of Regulation S under the
Securities Act.
(15) On September 14, 2000 the Registrant issued 7,486 shares of
Interpublic Stock and paid $424,000 in cash to the former shareholders of a
company as part of a deferred payment for 80% of the shares of the company
acquired in the second quarter of 1998. The shares of Interpublic Stock were
valued at $ 287,162 at the date of issuance.
The shares of Interpublic Stock were issued by the Registrant
without registration in an "off shore transaction" and solely to "non US
persons" in reliance on Rule 903 (b)(3) of Regulation S under the Securities
Act.
(16) On September 15, 2000, the Registrant paid cash of $697,769 and
issued a total of 12,601 shares of Interpublic Stock to shareholders of a
foreign company as an installment payment of the purchase price for 71% of the
capital stock of the foreign company. The Interpublic Stock issued had a market
value of $483,339 on the date of issuance.
The shares of Interpublic Stock were issued by the Registrant
without registration in an "offshore transaction" and solely to "non-U.S.
persons" in reliance on Rule 903(b) (3) of Regulation S under the Securities
Act.
(17) On September 15, 2000, the Registrant paid $100,000 in cash and
issued 2,703 shares of Interpublic Stock to shareholders of a foreign company as
consideration for the second installment payment of the purchase price for 51%
of the capital stock of the foreign company. The Interpublic Stock issued had a
market value of $103,665 on the date of issuance.
The shares of Interpublic Stock were issued by the Registrant
without registration in an "offshore transaction" and solely to "non-U.S.
persons" in reliance on Rule 903(b) (3) of Regulation S under the Securities
Act.
(18) On September 21, 2000, a subsidiary of the Registrant acquired
100% of the capital stock of a foreign company in consideration for which
Registrant paid an initial installment of $3,475,000 in cash to the shareholders
of the acquired company and issued 63,499 shares of Interpublic Stock to a
trustee which shares shall eventually be distributed to the shareholders of the
acquired company. The shares of Interpublic Stock were valued at $2,400,000 on
the date of issuance.
The shares of Interpublic Stock were issued by the Registrant
without registration in an "offshore transaction" and solely to
"non-U.S.persons" in reliance on Rule 903(b)(3) of Regulation S under the
Securities Act.
(19) On September 22, 2000, a subsidiary of the Registrant acquired
100% of the capital stock of four related companies in consideration for which
Registrant paid $6,665,598.44 in cash and issued 64,114 shares of Interpublic
Stock to the shareholders of the acquired companies. The shares of Interpublic
Stock were valued at $2,219,947.25 on the date of issuance.
The shares of Interpublic Stock were issued by the Registrant
without registration in an "offshore transaction" and solely to "non-U.S.
persons" in reliance on Rule 903(b)(3) of Regulation S under the Securities Act.
(20) On September 22, 2000, a subsidiary of the Registrant acquired
75% of the capital stock of a foreign company in consideration for which the
Registrant paid $1,899,000 in cash and issued without registration 25,800 shares
of Interpublic Stock to the shareholders of the acquired company. The shares of
Interpublic Stock issued to the stockholders of the acquired company had a
market value of $970,854 on the date of issuance.
The shares of Interpublic Stock were issued by the Registrant
without registration in an "offshore transaction" and solely to "non-U.S.
persons" in reliance on Rule 903(b)(3) of Regulation S under the Securities Act.
(21) On September 27, 2000, the Registrant issued an aggregate of
44,452 shares of Interpublic Stock and paid $2,600,000 in cash to the former
shareholder of a company which was acquired in the first quarter of 1998. This
represented a deferred payment of the purchase price. The shares of Interpublic
Stock were valued at $1,603,038 on the date of issuance.
The shares of Interpublic Stock were issued by the Registrant
without registration in reliance on Section 4(2) under the Securities Act, based
on the sophistication of the acquired company's former stockholder.
(22) On September 29, 2000, a subsidiary of the Registrant acquired
100% of the stock of a company in consideration for which the Registrant paid
$1,065,414 in cash, $2,130,827 in loan notes and issued 30,826 shares of IPG
Stock to the shareholder of the company. The shares of Interpublic Stock had a
market value of $1,065,414 on the date of issuance.
The shares of Interpublic Stock were issued by the Registrant
without registration in an "offshore transaction" and solely to "non-U.S.
persons" in reliance on Rule 903 (b) (3) of Regulation S under the Securities
Act.
(23) On September 29, 2000, a subsidiary of the Registrant acquired
60% of the stock of a company in consideration for which the Registrant paid
$300,000 in cash and issued 2,904 shares of Interpublic Stock to the shareholder
of the company. The shares of Interpublic Stock had a market value of $200,000
as of the date of issuance.
The shares of Interpublic Stock were issued by the Registrant
without registration in an "offshore transaction" and solely to "non-U.S.
persons" in reliance on Rule 903(b)(3) of Regulation S under the Securities Act.
(24) On September 29, 2000, a subsidiary of the Registrant acquired
80% of the capital stock of two related companies in consideration for which
Registrant paid $702,980.47 in cash and issued 2,355 shares of Interpublic Stock
to the shareholders of the acquired companies. The shares of Interpublic Stock
were valued at $80,217.19 on the date of issuance.
The shares of Interpublic Stock were issued by the Registrant
without registration in an "offshore transaction" and solely to "non-U.S.
persons" in reliance on Rule 903(b)(3) of Regulation S under the Securities Act.
Item 5. OTHER INFORMATION
Earnings guidance for the fourth quarter of 2000 is as follows:
The Registrant expects to report mid-to-high teens revenue growth
driven by a double-digit increase in organic revenue growth. This rate of
increase assumes a modest negative impact from foreign currency translation.
The operating profit margin is expected to increase by more than
100 basis points, as salary and related costs reflect the benefit of last year's
streamlining efforts at Lowe Lintas, Initiative Media and NFO Worldwide, Inc.
("NFO"). In addition, NFO recognized unusual operating charges last year, which
will be absent in the fourth quarter of 2000.
Lower non-operating income will temper the impact of a higher
operating margin.
The Registrant believes that "consensus" earnings estimates of
$1.49 to $1.51 for the full year 2000 are consistent with these expectations.
The information in Item 5 constitutes forward-looking statements.
Reference is made to Registrant's Cautionary Statement on forward-looking
statements in Management's Discussion and Analysis of Financial Condition and
Results of Operations of this Report.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) EXHIBITS
EXHIBIT 4 Senior Debt Indenture, dated as of October 20, 2000 by and
between the Registrant and The Bank of New York as Trustee
(incorporated herein by reference to Exhibit 99.1 of the
Registrant's Current Report on Form 8-K dated October 24, 2000).
EXHIBIT 10(a) Credit Agreement dated August 25, 2000 between the Registrant and
The Chase Manhattan Bank.
EXHIBIT 10(b) Promissory Note, dated August 25, 2000 of the Registrant.
Exhibit 11 Computation of Earnings Per Share.
Exhibit 27 Financial Data Schedule.
(b) Reports on Form 8-K
The following reports on Form 8-K were filed during the quarter ended
September 30, 2000:
(1) Report, dated July 17, 2000, Item 5 Other Events, disclosing the
Registrant's restatement of its consolidated financial statements to
reflect the effect of the acquisition of NFO Worldwide Inc., accounted for
as a pooling of interests; Item 7 Financial Statements of Registrant and
Exhibits. Supplemental Consolidated Balance Sheet at December 31, 1999 and
1998, Supplemental Consolidated Statement of Income, Supplemental
Consolidated Statement of Cash Flows and Supplemental Consolidated
Statement of Stockholders' Equity and Comprehensive Income, all for the
years December 31, 1999, 1998 and 1997; Supplemental Consolidated Balance
Sheet at March 31, 2000 and December 31, 1999 and Supplemental Consolidated
Statement of Income, Supplemental Consolidated Statement of Comprehensive
Income and Supplemental Consolidated Statement of Cash Flows, all for the
three months ended March 31, 2000 and 1999.
(2) Report, dated July 27, 2000, Item 5 Other Events and Exhibit 99.1,
disclosing the Registrant's press release regarding results for the three
and six months periods ended June 30, 2000.
(3) Report, dated September 15, 2000, Item 5, disclosing that the
Registrant's Financial Statements included in its Report, dated July 17,
2000 became its historical results upon announcement of its results for the
three months ended June 30, 2000; Item 7 Financial Statements and Exhibits.
Same Financial Statements as included in Report, dated July 17, 2000,
except for the removal of references to the financial statements as being
supplemental (See Item 6(b)(1) of this Report).
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 thereunto duly authorized.
THE INTERPUBLIC GROUP OF COMPANIES, INC.
(Registrant)
Date: November 14, 2000 BY /s/ PHILIP H. GEIER, JR.
-----------------------------------
PHILIP H. GEIER, JR.
Chairman and Chief Executive
Officer
Date: November 14, 2000 BY /S/ FREDERICK MOLZ
-----------------------------------
FREDERICK MOLZ
Vice President and Controller
INDEX TO EXHIBITS
EXHIBIT NO. DESCRIPTION
- ----------- -----------
EXHIBIT 4 Senior Debt Indenture, dated as of October 20, 2000 by and
between the Registrant and The Bank of New York as Trustee
(incorporated herein by reference to Exhibit 99.1 of the
Registrant's Current Report on Form 8-K dated October 24, 2000).
EXHIBIT 10(a) Credit Agreement dated August 25, 2000 between the Registrant
and The Chase Manhattan Bank.
EXHIBIT 10(b) Promissory Note, dated August 25, 2000 of the Registrant.
Exhibit 11 Computation of Earnings Per Share.
Exhibit 27 Financial Data Schedule.