IPG
    Print Page  Close Window

SEC Filings

10-K
INTERPUBLIC GROUP OF COMPANIES, INC. filed this Form 10-K on 02/23/2015
Entire Document
 

Management’s Discussion and Analysis of Financial Condition and Results of Operations - (continued)
(Amounts in Millions, Except Per Share Amounts)



The following tables present a summary of financial performance for the year ended December 31, 2014, as compared with the same periods in 2013 and 2012.
 
Years ended December 31,
 
2014
 
2013
% Increase
Total
 
Organic
 
Total
 
Organic
Revenue
5.8
%
 
5.5
%
 
2.4
%
 
2.8
 %
Salaries and related expenses
6.0
%
 
5.6
%
 
3.5
%
 
3.8
 %
Office and general expenses
0.5
%
 
0.5
%
 
1.6
%
 
2.5
 %
 
 
 
 
 
 
 
 
 
 
 
Years ended December 31,
 
 
 
2014
 
2013
 
2012
Operating margin
 
 
10.5
%
 
8.4
%
 
9.8
 %
Expenses as % of revenue:
 
 
 
 
 
 
 
Salaries and related expenses
 
 
64.0
%
 
63.8
%
 
63.1
 %
Office and general expenses
 
 
25.6
%
 
26.9
%
 
27.1
 %
Restructuring and other reorganization-related charges (reversals), net
 
 
0.0
%
 
0.9
%
 
0.0
 %
 
 
 
 
 
 
 
 
Net income available to IPG common stockholders
 
 
$
477.1

 
$
259.2

 
$
435.1

 
 
 
 
 
 
 
 
Earnings per share available to IPG common stockholders:
 
 
 
 
 
 
 
       Basic
 
 
$
1.14

 
$
0.62

 
$
1.01

       Diluted
 
 
$
1.12

 
$
0.61

 
$
0.94


When we analyze period-to-period changes in our operating performance, we determine the portion of the change that is attributable to changes in foreign currency rates and the net effect of acquisitions and divestitures, and the remainder we call organic change, which indicates how our underlying business performed. The performance metrics that we use to evaluate our results include the organic change in revenue, salaries and related expenses and office and general expenses, and the components of operating expenses, expressed as a percentage of total consolidated revenue. Additionally, in certain of our discussions we analyze revenue by business sector, where we focus on our top 100 clients, which typically constitutes approximately 55% to 60% of our annual consolidated revenues. We also analyze revenue by geographic region.
The change in our operating performance attributable to changes in foreign currency rates is determined by converting the prior-period reported results using the current-period exchange rates and comparing these prior-period adjusted amounts to the prior-period reported results. Although the U.S. Dollar is our reporting currency, a substantial portion of our revenues and expenses are generated in foreign currencies. Therefore, our reported results are affected by fluctuations in the currencies in which we conduct our international businesses. We do not use derivative financial instruments to manage this translation risk. Our exposure is mitigated as the majority of our revenues and expenses in any given market are generally denominated in the same currency. Both positive and negative currency fluctuations against the U.S. Dollar affect our consolidated results of operations, and the magnitude of the foreign currency impact on us related to each geographic region depends on the significance and operating performance of the region. The primary foreign currencies that impacted our results during 2014 included the Argentine Peso, Australian Dollar, Brazilian Real and British Pound Sterling. During 2014, the U.S. Dollar was stronger relative to several foreign currencies in regions where we conduct our business as compared to the prior-year period, which had a negative impact on our 2014 consolidated results of operations. For 2014 and 2013, foreign currency fluctuations resulted in net decreases of approximately 1% in revenues and operating expenses, which had a negative impact on our operating margin percentage.
For purposes of analyzing changes in our operating performance attributable to the net effect of acquisitions and divestitures, transactions are treated as if they occurred on the first day of the quarter during which the transaction occurred. During the past few years we have acquired companies that we believe will enhance our offerings and disposed of businesses that are not consistent with our strategic plan. For 2014 and 2013, the net effect of acquisitions and divestitures increased revenue and operating expenses compared to the prior-year period. See Note 4 to the Consolidated Financial Statements for additional information on our acquisitions.


15