Management Optimistic for Turnaround This Year

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NEW YORK ( -- Interpublic Group of Cos. posted a net loss in 2003, but management vowed the agency holding company is in a position to turn a profit this year.

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.

Restructuring charges
A large portion of the losses were due to the tax implications of the company's ongoing restructuring, said Christopher Coughlin, chief financial officer. In a conference call with analysts, he said the company posted net income of $125.3 million before taxes for the fourth quarter. Interpublic has already taken $175.6 million of a projected $250 million in restructuring charges and should complete the remainder in the first half of 2004, Mr. Coughlin said. Upcoming restructuring actions will focus on Europe, since the company has been losing money in that region while making money on its domestic operations, he said.

Interpublic made strong progress in cutting its debt during 2003, from $1.7 billion at the end of 2002 to $469 million by Dec. 31, 2003, Mr. Coughlin said. It raised $693 million from the sale of stock and other equity during the fourth quarter and another $99 million from the sale of its stakes in Modem Media and Taylor Nelson Sofres.

Sports properties
Interpublic also put a $26 million price tag on the recent sale of four remaining U.K. racetracks owned by its Brands Hatch Circuits unit. By completing that sale, Interpublic will have sold off all its motor sports holdings except for a Formula One track in the U.K., and Chairman-CEO David Bell said options for that property are being explored. The racing operations 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," Mr. Bell said. He noted key steps -- such as the Brands Hatch sale, the settlement of shareholder suits and debt reduction -- have already been achieved. The shareholder suit settlement is now pending court approval, he said.

The executives gave analysts no specific guidance for this year's results and skimped on some other figures. 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, saying they are not accurate.

'Stutter steps'
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."

Wall Street seemed inclined to give the company the benefit of the doubt. Interpublic's stock rose by 3.8% to $17.10 in the hour after the conference call. In a note to investors, Schwab Soundview Capital Markets analyst Joseph Stauff noted 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.

Interpublic's fourth-quarter results "indicate solid and apparent progress in its turnaround," he wrote. "Not only is there some relief from a solid quarterly performance, but we believe this is the first evidence the Street has seen of [Interpublic] approaching normalized margins."

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