NEW YORK (AdAge.com) -- These days, even positive news for Interpublic seems to have bad news attached.
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
Troubled advertising holding company Interpublic Group of Cos., which has lost some of its largest pieces of business, including financial services giant Bank of America, automaker General Motors Corp. in North America and, just this week, home-improvement chain Lowe's, said today in a release that it "remains on track" to file financial results for full-year 2004 and the first two quarters of this year by Sept. 30.
2000 to 2004
But at the same time, the company said it will have to restate earnings from 2000 to 2004. Details are included in an 8-K filing with the Securities and Exchange Commission filed today.
The company has yet to file its annual report for 2004 as well as reports for the first and second quarters of this year. Failure to file by Sept. 30 could lead to the company's delisting from the New York Stock Exchange. It could also create further financial woes, such as causing the company to default on bond agreements.
In the filing, Interpublic disclosed that its internal investigations into financial and accounting procedures revealed "possible employee misconduct" and accounting errors Interpublic called "qualitatively material." The investigations were primarily into agencies located outside the U.S.
Interpublic said the accounting errors were the result of misapplication and inadequate knowledge of Generally Accepted Accounting Principles as well as errors resulting from "instances of falsified books and records, violations of laws, regulations and company policies, misappropriation of assets, and inappropriate customer charges and dealings with vendors." The investigations are nearing completion, Interpublic said, and culpable employees have been terminated or are in the process of being terminated or are otherwise no longer with the company.
This is the second time in just over two years that Interpublic has restated financials. In early 2003, it restated earnings downward for the previous five years by $181.3 million after an internal investigation uncovered that intercompany charges were not accounted for properly. The restatements announced today involve other categories: accounting for revenue, accounting for acquisitions and accounting for lease expenses.
No longer reliable
Interpublic today said previously issued financial statements and preliminary, unaudited interim information released earlier this year, as well as previous disclosures concerning the nature or amount of the restatement, should no longer be relied upon.
Last week, Merrill Lynch analyst Lauren Rich Fine downgraded Interpublic's stock to "sell" and in a strongly worded report reduced growth forecasts for next year to less than 3% and noted that Interpublic's recent account losses suggest "overall instability." Another analyst, Alexa Quadrani of Bear Stearns, maintained a "peer perform" rating but questioned how Interpublic will be able to compete with larger rivals Omnicom Group and WPP Group when faced with big losses.