Interpublic, Grey, Omnicom hold the line in 2003: 10-K

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Agency holding companies were even more conservative in 2003 than they had been in 2002, with fewer acquisitions and tighter payrolls, according to annual reports submitted to federal regulators.

In 10-K annual reports filed with the U.S. Securities and Exchange Commission, Omnicom Group, Interpublic Group of Cos. and Grey Global group disclosed they held the line on acquisitions in 2003. Omnicom spent $236.4 million acquiring 13 new subsidiaries and increasing stakes in others, a sharp drop from the $355.2 million the company spent acquiring 40 new subsidiaries in 2002.

Interpublic's acquisitions were down even more sharply, only $4 million spent on two acquisitions, down from 9 acquisitions worth $49.3 million in 2002. Grey spent $21.3 million in acquisitions during 2003, flat compared to $21.1 million in 2002.

For Interpublic, some past acquisitions continued to haunt the bottom line. The company revised some language in its 10K to change the potential cost of the ongoing restructuring to $275 million, from a previous estimate of $250 million.

An Interpublic spokesman said the wording change doesn't mean the projected total has changed. Since the company's credit covenants with its banks allow up to $275 million, management changed the wording to allow more flexibility, he said.

Interpublic also disclosed it could have to make a $200 million cash payment as part of its efforts to divest its motor sports operations. The company's commitments to the Silverstone racing circuit in the U.K. include $460 million in contract obligations, which could require a $200 million buyout. According to the filing, Interpublic is "exploring various options" to exit the motor sports business, which it blames for several restatements of earnings and profit shortfalls in 2003.

Interpublic also disclosed the U.S. Internal Revenue Service has expanded its revision of the company's tax filings to cover all filings from 1994 through 2002. The company had already disclosed a review of the 1994 through 1996 periods, but added the IRS had expanded the scope in February. The Interpublic spokesman said it was not unusual for the IRS to review additional years.

staffing

All three holding companies kept a rein on staffing during 2003. Interpublic started 2004 with 43,400 staffers, after approximately 2,900 layoffs during its restructuring. The bulk of the layoffs came in the U.S., U.K. and France, according to the breakdown of severance costs listed in the 10K. Omnicom's payroll increased only slightly, to 58,500 employees at the end of 2003, from 57,600 on Dec. 31, 2002. Grey's employee numbers remained flat at 10,500 staffers at the end of 2003, the same number it had at the end of 2002.

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