Marketing and advertising giant Interpublic Group of companies filed a delayed earning statement Friday for 2004 and the first half of 2005, along with a restatement of prior earnings that cut more than $500 million from its profits for the period from 2000 through third quarter 2004.
The delayed filing of financial results for 2004 and the first half of 2005 came in time to prevent a possible stock exchange delisting for the company.
Interpublic has been the target of allegations of improper accounting arising from the acquisition binge in the late 1990s that made it the third largest advertising conglomerate in the world, after Omnicom Group and WPP Group. IPG owns integrated marketing company Draft, McCann Erickson, Lowe Worldwide, MAGNA Global and Deutsch, among other agencies.
In September, IPG said internal investigations had turned up instances of theft and fraud, mostly in overseas operations. The company has been under investigation by the Securities and Exchange Commission since 2002, has restated its earnings twice in that time, and may face a shareholder call for the sale of the company at its 2005 annual general meeting.
“We turned the organization upside-down over the past six months, effectively redoing Interpublic’s accounting for the past five years,” Frank Mergenthaler, IPG chief financial officer, said in a conference call after the filing. “The material weaknesses in internal controls that made this necessary arose from the lack of post-merger integration at many acquired companies, lack of competent financial talent across the group, and lack of clearly defined policies and procedures.”
IPG said its investigation showed that no current senior executives were involved in malfeasance. The company said it will pay $250 million in compensation over the next two years, mostly to clients who were victims of improper practices.
For 2004, Interpublic reported a loss of $558.2 million on revenue of $6.39 billion. That compares with a 2003 loss of $539.1 million.
For the first half of 2005, the company posted a loss of $139.4 million on $2.95 billion in revenue, compared to a loss of $182 million for the same period a year ago. Second-quarter 2005 earnings were $7.7 million on revenue of $1.6 billion, an improvement over a restated loss of $93.4 million for the same quarter of 2004.
IPG lost several of its biggest accounts this year, including media buying for General Motors and Bank of America, which transferred control of its overall marketing to IPG rival Omnicom at the end of August.
Loss of the Bank of America account at the end of August led integrated marketing agency Draft to lay off more than 40 staff from its New York office last week.
