Interpublic posted a net loss of $102.5 million for the fourth quarter and $451.7 million for the year. Revenues were up 5.7% for the quarter, to $1.63 billion and 2.2% for the year, to $5.86 billion. But on an organic basis-excluding asset sales and currency fluctuations-revenue was down 1.1% for the quarter and 3.6% for the year.
A large portion of the losses was due to tax implications of the ongoing restructuring, said Christopher Coughlin, chief financial officer. In a conference call with analysts, he noted Interpublic posted $125.3 million in income before taxes for the fourth quarter, but also showed a provision for taxes of $217.7 million. That was due to charges taken as part of the $250 million in restructuring charges planned.
Interpublic has already taken $175.6 million of the projected charges and should complete the remainder in the first half of '04, Mr. Coughlin said. Upcoming restructuring actions will focus on Europe, where the company has been losing money while making money on its domestic operations.
Interpublic made progress in 2003 cutting its net debt, from $1.7 billion at the end of 2002 to $469 million by Dec. 31, 2003, said Mr. Coughlin. It raised $693 million from the sale of stock and other equity and another $99 million from the sale of stakes in Modem Media and Taylor Nelson Sofres it acquired as part of its purchase of True North Communications and the sale of NFO Worldwide. Interpublic also disclosed a $26 million price tag on the recent sale of the four U.K. racetracks, part of its plan to divest of all the motor-sports holdings, which were blamed for several restatements of earnings and profit shortfalls in 2003.
"As I see it, the first phase of the turnaround is coming to a close" and Interpublic is now going into "a period of growth," said Chairman-CEO David Bell. Key steps-such as the racetrack sale, settling shareholder suits and debt reduction-have already been achieved, he said. The executives gave analysts no guidance for this year's results and skimped on some other metrics. When analysts asked if revenue is showing organic growth in the first quarter, Mr. Bell demurred, saying it is hard to project, since some lines of business are showing organic growth and others are not. The executives also refused to give net new business figures for 2003.
Although the company is in a better position going into 2004, Mr. Bell warned that Interpublic is now six months into what should be a 24- to 36-month restructuring process and it "will not be a linear one ... there may be stutter steps."
Interpublic's stock closed at $16.93 the day of the announcement, up 2.8%. In a note to investors, Schwab Soundview Capital Markets analyst Joseph Stauff said the company posted better-than-expected profit margins before the charges, which hints it could return to normal profits in the next 12 to 18 months.