IPG Posts Quarterly Loss of $13.5 Mil.

NEW YORK The Interpublic Group of Companies reported a loss of $13.5 million in the second quarter, as the costs of corporate restructuring and asset impairment charges at its MotorSports unit hurt operating earnings by $105.4 million. In the year-earlier period, IPG reported operating income of $238.5 million or 31 cents a share.

Because of the company’s restructuring efforts and “a business environment that remains challenging,” the company said it is “withdrawing previous earnings guidance.”

IPG CEO David Bell signaled the restructuring in May, during his first-quarter call with analysts. Layoffs began in the second quarter and are expected to continue throughout the year, said sources [Adweek, Aug. 11]. The bulk of the restructuring costs occurred in the second quarter, however, thereby contributing to the net loss.

In a breakdown of operating expenses, IPG noted significant cuts in staffing. During the first six months of 2003, IPG reduced its worldwide headcount by 5 percent or 2,400 employees, from 46,900 to 44,500, the company said.

“We are making headway,” Bell told industry analysts during a conference call. “But there’s still much to be done. Interpublic’s status today is largely the result of actions that took place over several years. There are no silver bullets. What there must be, however, and what we pledge to you, is that we will continue to move forward with a great sense of urgency.”

Second-quarter revenue was flat at $1.5 billion, which includes the benefits of the weak dollar. On a constant currency basis, revenue actually slumped 3.6 percent. Organic revenue fell 3 percent in the quarter. However the company noted some improvement in domestic organic growth, which climbed 1.4 percent.

Continuing operations generated a loss of six cents a share while discontinued operations contributed a gain of two cents a share, making for a second-quarter loss of four cents a share.

Advertising and media revenue in the second quarter rose 1.4 percent to $970 million while marketing services fell 0.8 percent to $529 million.

The loss was deeper than for the first three months of year, when IPG reported a net loss of $8.6 million, or 2 cents per share. For the first half the company posted a loss of $22.1 million compared to a profit of $168.8 million a year ago.

The hour-long analysts’ call was the last for outgoing CFO Sean Orr and the first for new COO Chris Coughlin, who joined IPG in June and will assume Orr’s title and duties once he leaves this month.

Like Bell, Coughlin stressed to analysts that although progress has been made, IPG must do more to cut costs and improve margins. To that end, he pointed to efforts to make agencies more accountable for their financial performances, such as having unit CFOs report to IPG as well as their CEOs, and attempts to consolidate purchasing and shrink real estate costs.

“The turnaround that is required will not be an easy or quick process,” Coughlin said.

This story updates an item posted earlier today.