UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): May 14, 2003
THE INTERPUBLIC GROUP OF COMPANIES, INC.
(Exact name of registrant as specified in its charter)
Delaware 1-6686 13-1024020
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State or other jurisdiction of (Commission (I.R.S. Employer
incorporation or organization) File Number) Identification No.)
1271 Avenue of the Americas, New York, New York 10020
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212) 399-8000
N/A
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(Former name or former address, if changed since last report.)
INDEX
Page
Item 5. OTHER EVENTS AND REGULATION FD DISCLOSURE................3
Item 7. FINANCIAL STATEMENTS AND EXHIBITS........................4
SIGNATURES.................................................................10
Item 5. Other Events and Regulation FD Disclosure.
(a) Sale of NFO.
On May 14, 2003, The Interpublic Group of Companies, Inc. (the
"Company") entered into a definitive agreement for the sale of NFO WorldGroup,
Inc. ("NFO") to Taylor Nelson Sofres ("TNS") in return for $400 million in cash
and 11,688,218 ordinary shares of TNS (which, as of June 16, 2003 had an
aggregate market value of approximately $33.6 million). The Company has agreed,
subject to specified conditions, to hold half of the TNS shares until at least
December 2003 and the remainder until at least March 2004. TNS will pay the
Company an additional $10 million in cash approximately one year following the
closing of this divestiture contingent on the market price per TNS ordinary
share continuing to exceed 146 pence (equivalent to approximately $2.50 at
current exchange rates) during a specified averaging period one year from
closing. The portion of the consideration consisting of ordinary shares of TNS
will be admitted for trading on the London Stock Exchange. The conditions to the
consummation of this divestiture include approval by a special meeting of the
shareholders of TNS, disbursement of acquisition financing to TNS and receipt of
regulatory clearances in the United States and abroad. The Company expects to
consummate the transaction in the summer of 2003. As a result of this
divestiture, the Company expects to realize a pre-tax gain of approximately $100
million. If this transaction were not to close as a result of either the failure
of the shareholders of TNS to approve the transaction or the failure of TNS to
obtain acquisition financing, then TNS would generally be required to pay a
$4.25 million termination fee to the Company. The descriptions of this
divestiture transaction in this document are qualified in their entirety by
reference to the Share Purchase Agreement, dated as of May 14, 2003, which is
attached hereto as Exhibit 2.1.
Based on circumstances surrounding the decision to divest NFO, it has
been determined that the assets and liabilities of NFO should be classified in
the Company's March 31, 2003 balance sheet as assets and liabilities held for
sale in accordance with SFAS 144, "Accounting for the Impairment or Disposal of
Long-Lived Assets". As a result of the agreement referred to above, the results
of NFO will be treated as discontinued operations in the second quarter of 2003.
For 2002, the revenues and net income of NFO were $466.1 million and $31.5
million, respectively. For the first quarter of 2003, the revenues and net
income of NFO were $117.3 million and $2.6 million, respectively.
Included in assets held for sale as of March 31, 2003 are accounts
receivable of $81.4 million, prepaid expenses and other current assets of $52.7
million, net fixed assets of $46.9 million, intangible assets of $214.1 million
and other assets of $19.5 million. Included in liabilities held for sale as of
March 31, 2003 are accounts payable of $21.7 million, accrued expenses of $73.8
million, and other liabilities of $25.6 million.
(b) Legal Proceedings Update.
As previously disclosed, a consolidated federal securities purported
class action and two state securities purported class actions arising out of the
recent restatements of the Company's financial statements are among several
lawsuits currently pending against the Company. Also as previously disclosed, on
April 15, 2003, on plaintiffs' motion, the latter two suits were remanded to
Illinois state court by the United States District Court for the Northern
District of Illinois, to which they had previously been removed. Furthermore, on
May 29, 2003, the United States District Court for the Southern District of New
York denied the Company's motion to dismiss the complaint in the consolidated
federal securities purported class action. The Company intends to defend these
actions vigorously. However, as with all litigation, these proceedings contain
elements of uncertainty and the final resolution of these actions could have a
material impact on the Company's financial position, cash flows or results of
operations.
Item 7. Financial Statements and Exhibits.
(b) Pro Forma Financial Information.
The following unaudited pro forma financial information assumes the
divestiture of NFO to TNS in accordance with the definitive agreements signed
May 14, 2003 by the Company and TNS. The following unaudited pro forma balance
sheet as of March 31, 2003 is based on the historical financial statements of
the Company as of March 31, 2003 after giving effect to the divestiture
transaction as if it had occurred on March 31, 2003. The following unaudited pro
forma statements of income for the three months ended March 31, 2003 and the
fiscal years ended December 31, 2002, 2001 and 2000 are based on the historical
financial statements of the Company for such periods after giving effect to the
divestiture transaction as if it had occurred on January 1, 2000. You should
read the information presented below in conjunction with the financial
statements and the notes to the financial statements of the Company included in
the Company's annual report on Form 10-K for the year ended December 31, 2002
and the Company's quarterly report on Form 10-Q for the quarter ended March 31,
2003. The unaudited pro forma information below helps to illustrate the
financial characteristics of the divestiture under one set of assumptions, but
does not attempt to predict or suggest future results. Moreover, the unaudited
pro forma information does not attempt to show what the financial condition or
results of operations of the Company would have been if the divestiture
transaction had occurred at March 31, 2003 or at the commencement of the periods
indicated below.
Unaudited pro forma condensed consolidated statements of operations for
the periods ended December 31, 2002, 2001 and 2000 and March 31, 2003 are as
follows:
THE INTERPUBLIC GROUP OF COMPANIES, INC. AND ITS SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(Amounts in Millions, Except Per Share Amounts)
(Unaudited)
YEAR ENDED DECEMBER 31, 2002
Historical NFO Pro forma
REVENUE $6,203.6 $466.1 $5,737.5
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OPERATING EXPENSES:
Salaries and related expenses 3,549.0 199.0 3,350.0
Office and general expenses 2,096.6 216.2 1,880.4
Amortization of intangible assets 13.0 4.1 8.9
Restructuring and other merger-related costs 12.1 - 12.1
Long-lived asset impairment and other charges 127.1 - 127.1
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Total operating expenses 5,797.8 419.3 5,378.5
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OPERATING INCOME 405.8 46.8 359.0
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OTHER INCOME (EXPENSE):
Interest expense (145.6) - (145.6)
Interest income 29.8 - 29.8
Other income 15.1 7.2 7.9
Investment impairment (39.7) - (39.7)
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Total other income (expense) (140.4) 7.2 (147.6)
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INCOME BEFORE PROVISION FOR INCOME TAXES 265.4 54.0 211.4
Provision for income taxes 140.3 22.4 117.9
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INCOME OF CONSOLIDATED COMPANIES 125.1 31.6 93.5
Income applicable to minority interests (31.3) (0.8) (30.5)
Equity in net income (loss) of unconsolidated affiliates 5.7 0.7 5.0
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INCOME OF CONSOLIDATED COMPANIES FROM CONTINUING OPERATIONS $99.5 $31.5 $68.0
======== ====== ========
Earnings per share (basic and diluted):
Continuing operations $0.26 $0.08 $0.18
Weighted average shares:
Basic 376.1 - 376.1
Diluted 381.3 - 381.3
Cash dividends per share $0.38 - $0.38
THE INTERPUBLIC GROUP OF COMPANIES, INC. AND ITS SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(Amounts in Millions, Except Per Share Amounts)
(Unaudited)
YEAR ENDED DECEMBER 31, 2001
Historical NFO Pro forma
REVENUE $6,791.2 $438.5 $6,352.7
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OPERATING EXPENSES:
Salaries and related expenses 3,809.2 188.3 3,620.9
Office and general expenses 2,103.8 207.7 1,896.1
Amortization of intangible assets 173.1 8.5 164.6
Restructuring and other merger-related costs 645.6 11.1 634.5
Long-lived asset impairment and other charges 303.1 - 303.1
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Total operating expenses 7,034.8 415.6 6,619.2
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OPERATING INCOME (LOSS) (243.6) 22.9 (266.5)
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OTHER INCOME (EXPENSE):
Interest expense (164.6) - (164.6)
Interest income 41.8 - 41.8
Other income 13.7 - 13.7
Investment impairment (210.8) - (210.8)
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Total other income (expense) (319.9) - (319.9)
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INCOME (LOSS) BEFORE PROVISION FOR (BENEFIT OF) INCOME TAXES (563.5) 22.9 (586.4)
Provision for (benefit of) income taxes (55.3) 10.8 (66.1)
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INCOME (LOSS) OF CONSOLIDATED COMPANIES (508.2) 12.1 (520.3)
Income applicable to minority interests (30.3) (0.9) (29.4)
Equity in net income (loss) of unconsolidated affiliates 4.0 4.4 (0.4)
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INCOME (LOSS) OF CONSOLIDATED COMPANIES FROM CONTINUING OPERATIONS $(534.5) $15.6 $(550.1)
======== ====== ========
Earnings per share (basic and diluted):
Continuing Operations $(1.45) $0.04 $(1.49)
Weighted average shares (basic and diluted): 369.0 - 369.0
Cash dividends per share $0.38 - $0.38
THE INTERPUBLIC GROUP OF COMPANIES, INC. AND ITS SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(Amounts in Millions, Except Per Share Amounts)
(Unaudited)
YEAR ENDED DECEMBER 31, 2000
Historical NFO Pro forma
REVENUE $7,182.7 $454.2 $6,728.5
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OPERATING EXPENSES:
Salaries and related expenses 4,056.4 210.7 3,845.7
Office and general expenses 1,986.6 204.0 1,782.6
Amortization of intangible assets 144.4 8.4 136.0
Restructuring and other merger-related costs 177.7 18.6 159.1
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Total operating expenses 6,365.1 441.7 5,923.4
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OPERATING INCOME 817.6 12.5 805.1
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OTHER INCOME (EXPENSE):
Interest expense (126.3) - (126.3)
Interest income 57.5 - 57.5
Other income 42.6 - 42.6
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Total other income (expense) (26.2) - (26.2)
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INCOME BEFORE PROVISION FOR INCOME TAXES 791.4 12.5 778.9
Provision for income taxes 340.2 8.1 332.1
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INCOME OF CONSOLIDATED COMPANIES 451.2 4.4 446.8
Income applicable to minority interests (42.8) (0.6) (42.2)
Equity in net income (loss) of unconsolidated affiliates (15.6) 2.6 (18.2)
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INCOME OF CONSOLIDATED COMPANIES FROM CONTINUING OPERATIONS $392.8 $6.4 $386.4
======== ====== ========
Earnings per share:
Basic continuing operations $1.09 $0.02 $1.07
Diluted continuing operations $1.06 $0.02 $1.04
Weighted average shares:
Basic 359.6 - 359.6
Diluted 370.6 - 370.6
Cash dividends per share $0.37 - $0.37
THE INTERPUBLIC GROUP OF COMPANIES, INC. AND ITS SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(Amounts in Millions, Except Per Share Amounts)
(Unaudited)
QUARTER ENDED MARCH 31, 2003
Historical NFO Pro forma
REVENUE $1,433.0 $117.3 $1,315.7
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OPERATING EXPENSES:
Salaries and related expenses 908.2 53.5 854.7
Office and general expenses 484.4 58.5 425.9
Amortization of intangible assets 4.2 1.0 3.2
Long-lived asset impairment 11.1 - 11.1
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Total operating expenses 1,407.9 113.0 1,294.9
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OPERATING INCOME 25.1 4.3 20.8
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OTHER INCOME (EXPENSE):
Interest expense (38.8) - (38.8)
Interest income 7.9 - 7.9
Other income (expense) (0.2) - (0.2)
Investment impairment (2.7) - (2.7)
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Total other income (expense) (33.8) - (33.8)
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INCOME (LOSS) BEFORE PROVISION FOR (BENEFIT OF) INCOME TAXES (8.7) 4.3 (13.0)
Provision for (benefit of) income taxes (3.8) 1.8 (5.6)
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INCOME (LOSS) OF CONSOLIDATED COMPANIES (4.9) 2.5 (7.4)
Income applicable to minority interests (0.8) (0.2) (0.6)
Equity in net income (loss) of unconsolidated affiliates (2.9) 0.3 (3.2)
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INCOME (LOSS) OF CONSOLIDATED COMPANIES FROM CONTINUING OPERATIONS $(8.6) $2.6 $(11.2)
======== ====== ========
Earnings (loss) per share (basic and diluted):
Continuing operations $(0.02) $0.01 $(0.03)
Weighted average shares (basic and diluted): 381.8 - 381.8
Cash dividends per share - - -
The unaudited pro forma condensed consolidated balance sheet as of
March 31, 2003 is as follows:
THE INTERPUBLIC GROUP OF COMPANIES, INC. AND ITS SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
(Amounts in Millions)
(Unaudited)
Adjustments
-------------------------------------------------------
Elimination
of Assets
and
Cash and Liabilities
Transaction Debt "Held for
Costs Tax Elimination Sale"
Adjustments (Note (Note
Historical (Note 2) (Note 3(i)) 3(ii)) 3(iii)) Pro forma
---------- -------- ----------- ------ ------- ---------
CURRENT ASSETS:
Cash and cash equivalents $1,188.2 - - $(16.1) - $1,172.1
Account receivables, net 4,254.1 - - - - 4,254.1
Other current assets 1,277.0 - 2.1 - (414.6) 864.5
---------- --------- -------- ------- -------- ---------
Total current assets 6,719.3 - 2.1 (16.1) (414.6) 6,290.7
TOTAL FIXED ASSETS 727.5 - - - - 727.5
OTHER ASSETS:
Other assets 1,209.2 - - - - 1,209.2
Intangible assets, net 3,307.1 - - - - 3,307.1
---------- --------- -------- ------- -------- ---------
Total other assets 4,516.3 - - - - 4,516.3
---------- --------- -------- ------- -------- ---------
TOTAL ASSETS $11,963.1 - $ 2.1 $(16.1) $(414.6) $11,534.5
========== ========= ======== ======= ======== =========
CURRENT LIABILITIES:
Accounts payable 4,677.4 - - - - 4,677.4
Accrued expenses 1,017.4 $17.0 - - - 1,034.4
Accrued income taxes 3.4 - (1.1) - - 2.3
Loans payable 80.1 - - (7.8) - 72.3
Zero-coupon convertible senior notes 582.5 - - - - 582.5
Liabilities held for sale 121.1 - - - (121.1) -
---------- --------- -------- ------- -------- ---------
Total current liabilities 6,481.9 17.0 (1.1) (7.8) (121.1) 6,368.9
TOTAL NON-CURRENT LIABILITIES 3,329.7 - 9.6 - - 3,339.3
TOTAL NET ASSETS 2,151.5 (17.0) (6.4) (8.3) (293.5) 1,826.3
---------- --------- -------- ------- -------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $11,963.1 - $2.1 $(16.1) $(414.6) $11,534.5
========== ========= ======== ======= ======== =========
Notes to Unaudited Pro Forma Condensed Financial Information
1. Basis of Presentation
The accompanying financial statements have been presented to show the
impact of classifying the results of NFO as a discontinued operation. For
purposes of presentation, the statements of operations of NFO have been adjusted
to remove various intercompany charges, including those for interest, and the
balance sheet has been adjusted as discussed in Note 3 below.
2. Transaction
As noted above, the expected proceeds to be received include cash of
$400 million, 11,688,218 shares in TNS (which, as of June 16, 2003 had an
aggregate market value of approximately $33.6 million) and an additional $10
million in cash approximately one year after the closing of the transaction
contingent on the market price per TNS ordinary share continuing to exceed 146
pence (equivalent to approximately $2.50 at current exchange rates) during a
specified averaging period one year from closing. Based on consideration to be
received (excluding the contingent consideration), and after taking into account
transaction costs and expenses, the Company expects to realize a pre-tax gain of
approximately $100 million on completion of the transaction. The transaction is
expected to close during the summer of 2003.
The Company estimates that transaction costs (including fees payable to
the Company's financial advisors and bonuses payable to certain members of NFO
management) will approximate $17 million.
3. Balance Sheet Adjustments
The balance sheet presented as historical reflects the balance sheet
filed by the Company in its Form 10-Q for the three months ended March 31, 2003.
Adjustments have been made as follows:
(i) To adjust balance sheet accounts (principally related to taxes)
to reflect balances that would relate to NFO on a "stand alone"
basis;
(ii) To eliminate cash and debt balances that will be retained by TNS;
and
(iii) To eliminate all assets and liabilities of NFO that are "held
for sale."
(c) Exhibits.
Exhibit 2.1: Stock Purchase Agreement by and between TNS and the
Company dated as of May 14, 2003, is attached hereto as Exhibit 2.1.
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
The Interpublic Group of Companies, Inc.
Registrant
June 18, 2003
Date
By: /s/ Nicholas J. Camera
----------------------------------------
Nicholas J. Camera
Senior Vice President,
General Counsel and Secretary