$73.9 Mil. Q1 Loss for IPG


NEW YORK Hit by client cutbacks and exposure to the automotive and financial services industries, Interpublic Group today reported a first-quarter loss of $73.9 million, or 16 cents a share, compared with a loss of $69.7 million, or 15 cents a share, in the year-ago period.

Overall, revenue fell 10.8 percent to $1.33 billion. In organic terms, the decline was 5.6 percent, roughly in line with dips reported this week by its competitors Omnicom Group and WPP.

IPG's operating loss in the quarter was $82 million compared to a loss of $58 million in the 2008 quarter. IPG said that excluding severance from both periods, the company's operating margin was flat compared to last year, despite its double-digit drop in revenue. The company incurred severance expenses of $42 million in Q1, an increase of $28 million from a year ago. Over the past six months, the company has recorded about $90 million of severance expense related to the layoff of 2800 employees, or 6 percent of its workforce. (Download IPG's complete Q1 financials.)

In a conference call with investors, IPG CEO Michael Roth said: "While the automotive and financial services sectors were very hard hit, other client industries were down anywhere from 1 or 2 percent to up in the high single-digits. In fact, in the aggregate, our 20 top 100 clients, excluding the two hardest hit categories, were actually flat for the quarter."

IPG CFO Frank Mergenthaler said the company derives 13 percent of its business from the automotive and transportation sector and 8 percent from financial services.
Analysts asked about IPG's exposure to General Motors, as the automaker rushes to create a restructuring program that would allow it to avoid bankruptcy.

Mergenthaler reiterated remarks he made in the fourth quarter: In a worse-case bankruptcy scenario, IPG has a $150 million exposure in receivables, work-in-progress and committed media. However, when pressed today, Roth conceded that did not include costs associated with shutting down any of IPG's Detroit agencies. Mergenthaler pointed out those shops work for non-GM clients as well as the automaker
In IPG's agency networks, revenue decreased 10.2 percent, with an organic drop of 5.4 percent. Of that decline, U.S. revenue was off 8.4 while international markets took a 1.5 percent hit. Revenue was off at all of the company's networks, with the exception of Draftfcb, which saw growth from healthcare and direct marketing business.

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