NEW YORK -- Interpublic Group of Cos. swung to a net loss in the second-quarter on one-time charges, as earnings from operations met the company's lowered target. The company also issued a full-year earnings range which is below analysts' expectations.
The advertising firm reported a net loss of $110.2 million, or 30 cents a share, compared with year-earlier net income of $166.4 million, or 45 cents a share.
Excluding acquisition- and restructuring-related charges, Interpublic said it would have earned $117.1 million, or 31 cents a diluted share, compared with $201.4 million, or 54 cents a share, a year earlier.
Revenue fell 4.3% to $1.74 billion.
The results in both periods include True North Communications, which Interpublic acquired last month.
Blaming weaker-than-expected client spending, the parent of ad agencies such as McCann-Erickson and Lowe Lintas & Partners warned last month that it would earn 30 cents to 35 cents a share, down from its March forecast of 40 cents to 45 cents a share.
Interpublic agreed in March to acquire True North in a stock deal valued at about $1.6 billion. The purchase made Interpublic the world's largest advertising company by revenue and a powerhouse in media services.
The company is now forecasting it will record $500 million in restructuring charges this year, which exceeds earlier estimates of more than $300 million. Interpublic said in a prepared statement the increase is "due to an abrupt change in revenue trends in the second quarter, which precipitated higher severance expenses and facilities termination costs." The company recorded $51 million of the costs in the second quarter.
In a prepared statement, Chairman and Chief Executive John J. Dooner said, "We did not reduce costs as quickly and as deeply as needed" during the second quarter.
Chief Financial Officer Sean Orr added, "The need for these aggressive cost cuts intensified when the rate of client spending decelerated more swiftly than anticipated in May and June, and resulted in changes to our revenue forecast."
By the end of the restructuring, Interpublic expects to have 10% fewer employees. About 2,200 people were laid off in the first half of the year.
Going forward, Interpublic estimates that revenue will be flat in the second half of 2001 because of current economic conditions. Full-year earnings are slated to come in between $1.05 and $1.15 a share. The mean estimate of analysts surveyed by Thomson Financial/First Call was for earnings of $1.21 a share.
The company noted that each 1% change in revenue would result in per-share earnings changing by three cents.
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