IPG Restructuring Charges Higher Than Predicted

CEO Tells Analysts That Reorganization Process Is 'Messy'

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NEW YORK (AdAge.com) -- Interpublic Group of Cos. served Wall Street a negative surprise with its third-quarter earnings, including wider losses and news of an extended turnaround period.

$250 million
In a conference call with analysts, executives warned an ongoing restructuring will continue into the first half of next year and charges could reach $250 million.

Interpublic had previously planned to complete the restructuring this year, with charges of up to $200 million. The restructuring, initially announced last May, includes layoffs and office consolidations, as well as the sale of some assets. Interpublic reported its headcount at the end of the third quarter is nearly 4,000 employees less than the same time last year.

Long list
"The list of work to be done is long," said Chairman-CEO David Bell. He asked investors to "indulge me," reminding them that, after he took over the post last spring, he had warned the turnaround would not be easy.

"It clearly is messy," he said.

In spite of an improving outlook in the U.S. and some foreign markets, Interpublic posted a net loss of $327.1 million, compared to a loss of $89.6 million in 2002.

Sports marketing
The net loss was due to charges related to the restructuring and a $221 million charge to earnings to complete writing off goodwill at sports marketing unit Octagon Worldwide. The sports marketing unit is being restructured and integrated more closely with Interpublic's other holdings, while its troubled motor sports business is on the block. Mr. Bell said Interpublic has already exited the motor cross racetracks business and should hear from potential buyers for its four U.K. Formula One racetracks this week.

On the upside, Interpublic appears close to settling a series of shareholder lawsuits filed last year after the stock tanked in the wake of a series of earnings restatements. Mr. Coughlin said the company has earmarked a reserve of $127.6 million for settlements, which he said will be mainly made in stock. He would not elaborate on the status of the lawsuits.

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