NEW YORK Interpublic Group on Tuesday took the unusual step of reporting preliminary and unaudited financial results for 2004.
According to IPG's estimates, revenue grew almost 6 percent over the previous year to $6.2 billion.
Despite the increase, however, IPG projected an estimated $285 million loss for the year, due in part to explosive growth in professional fees.
CFO Bob Thompson, in a morning teleconference with industry analysts, said professional fees grew about $93 million between 2003 and 2004, $70 million of which is related to getting IPG in compliance with federal accounting standards.
Organic revenue, excluding pass-through out-of-pocket expenses, grew about 1 percent last year, to $5.88 billion, buoyed by the the company's performance in the U.S.—where organic revenue grew about 3 percent—but was dragged down by international results, which showed a 1.5 percent decline, according to IPG's preliminary figures.
By releasing unaudited numbers, IPG shifted the focus away from its recent acquisition accounting problem. Still, in the same document reporting its estimates, IPG acknowledged that auditors had uncovered another $35 million in net income from lease and earn-out expenses that were improperly accounted for.
That's over and above the acquisition accounting issue, which amounts to about $145 million in revenue and $25 million of net income that "may have been improperly recognized" between 1996 and 2001. That problem stemmed from IPG claiming full-year revenue for companies it bought mid-year [Adweek, March 14]. And sources expect those figures to grow during the course of the company's internal review.
Given the scope of the review and the variables involved, IPG CEO Michael Roth still can't provide a date for filing audited results with the Securities and Exchange Commission, either for 2004 or the first two quarters of 2005. In the hour-long teleconference with analysts, he apologized for the delay.
"We are working as diligently as possible to become current with our filings as quickly as possible, but cannot make any assurances on timing at this point," Roth said. "Given the complexity of the task at hand, the shortcomings we have disclosed in the control environment and the fact that we're in the initial stages of the process, it's difficult to identify a date for completing this process. However, as we get more clarity on the issues, we will continue to keep the market informed."
Reflecting on the preliminary 2004 numbers, Roth said: "We are generating some good momentum with our range of traditional and service offerings. As disclosed today, top line performance is showing positive trends, particularly in North America. We continue to close the organic revenue gap with our peers, which is encouraging."
He added: "We also continued to improve liquidity and lower debt over the course of the past year. Some important overhang issues, like motor sports (losses) and the shareholder (lawsuits), were resolved. Others, like the control environment, must still be dealt with.
"As I've said on more than one occasion, addressing internal controls is our most pressing priority. It's a necessary part of our turnaround. All of us deserve the opportunity to see this company move forward with a contemporary and effective financial infrastructure—one that enhances the business, instead of holding it back."