NEW YORK (AdAge.com) -- Interpublic Group of Cos. drastically lowered its earnings forecast for the year and nearly doubled its previously announced earnings restatement to up to $120 million.
Interpublic to Restate Five Years of Earnings
Discloses $68.5 Million in Improperly Expensed Charges
Interpublic Stock Plummets on Earnings Delay
Postponement Gives Audit Committee Time to Review Financials
The announcement came after the close of markets today, when the stock closed at $16.30, down 75 cents. In after-market trading, the stock plummeted to below $11, down about 34% to its lowest point since 1994.
The company said that a complete review of transactions between units uncovered more charges improperly expensed, in addition to $68.5 million in improperly expensed charges at its McCann-Erickson Europe unit that was announced in August. The total amount of the five-year restatement is now expected to be up to $120 million, including the $68.5 million, but the company said the restatement is not expected to cause material changes to results in any year.
The new restatement comes after Interpublic and its auditors found additional improperly reported expenses at McCann Europe; both the August restatement announcement and today's announcement relate to how McCann Europe accounted for intra-agency accounts payable, or expenses, when one office did work on behalf of another. Today's announcement comes as a surprise, given that Interpublic had previously stated the $68.5 million restatement was "the total charge" and that "accounting effects are final."
An Interpublic spokesman declined to comment beyond the announcement.
Well below analysts' consensus
The company dropped its full-year earnings forecast to 85 cents to 90 cents per share, from $1.25 to $1.35, and third-quarter earnings of .08 cents to 10 cents per share, far below analysts' consensus of 28 cents per share. Third-quarter revenue is down 7% and full-year revenue is now expected to be down 9%.
Management blamed the weak results on Interpublic's Octagon Motor Sports unit and slowdowns in marketing services activities, as well as continued weakness in Japan and Latin American markets. The Octagon Motor Sports holdings are being evaluated and management has been replaced.
Meanwhile, cost reductions -- including job cuts -- are being implemented in the marketing services operations, including public relations, corporate identity and point-of-sale marketing.