IPG Earnings Restatement Drops a Half-Billion Dollars

Filing Cites Seven Instances of Employee Misconduct

By Published on .

Most Popular

NEW YORK (AdAge.com) -- Following a six-month investigation of its books, Interpublic Group of Cos. this morning issued an earnings restatement that lopped off more than half-a-billion dollars over a period between 2000 and 2004.

Related Stories:
IPG to Restate Earnings Again
Reports 'Possible Employee Misconduct' Found
Interpublic Group Names New CFO
Frank Mergenthaler Was Formerly With Columbia House
SEC Widens Investigation of IPG
CFO of Embattled Holding Company to Leave
Interpublic Issues Unaudited 2004 Results
Operating Loss Estimated at $285 Million; CEO Defends Agencies
Cloud Over IPG Darkens
Possible New Financial Restatements and Extensive 'Material Weaknesses' Revealed
Interpublic Delays Release of Earnings Report
Cites 'Items That May Require Adjustments'
IPG Names Michael Roth New CEO
David Bell Moves to Co-Chairman
Interpublic to Settle Shareholder Lawsuits
Company Will Pay $115 Million in and Stock
Lawsuit Alleges 'Accounting Manipulations' at Interpublic
Current and Former Top Executives Named as Defendants
David Bell Named Interpublic Chief
John Dooner Steps Down, Will Return to Head McCann-Erickson WorldGroup
Interpublic Stock Hits 10-Year Low
Analysts Say New Credit Agreement Less Harsh Than Expected
SEC Launches Formal Probe of IPG Accounting
Focus Includes Five Years of Earnings Statements

Interpublic, the third-largest ad agency holding company, also shed some long-awaited light on its more recent financial performance. In filings, it said that net losses for the first half of this year narrowed to $139 million from $182 million during the same period in 2004. Revenue grew 1.5% to $2.95 billion.

In 2004, revenue grew by 3.7% to $6.4 billion, while net losses widened to $558 million from $539 million in 2003.

Delayed by investigations
The company had delayed its Security and Exchange Commission filings because of its ongoing investigations.

Just under half of the amount of retained earnings that were reduced was attributed to problems with revenue recognition "as the company's review of more than 20,000 contracts found that some had been inconsistently followed, while others were unclear or did not exist." About $184 million had to do with vendor discounts. Adjustments for earn-outs made up about $70 million, while incorrect recognition of expenses and revenue for acquired business cost it $30 million in revenue.

Employee misconduct
About $56 million in reduction of earnings came as a result of an anti-fraud investigation. "Instances in which the company believes there was malfeasance do not involve current senior level employees at any of our operating units or within the corporate group," the filings said. "These cases took place primarily outside of the United States. Seven instances of employee misconduct account for approximately 80% of the adjustment in this category."

The company increased retained earnings for goodwill and investment impairment charges by about $145 million.

A conference call with analysts is planned this morning.

In this article: