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SEC Filings

10-K
INTERPUBLIC GROUP OF COMPANIES, INC. filed this Form 10-K on 02/22/2016
Entire Document
 

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



certain agency-related bonus accruals resulting from improved financial performance, partially offset by lower severance expense. Our staff cost ratio increased in 2014 to 64.0% from 63.8% in 2013.
The following table details our staff cost ratio.
 
Years ended December 31,
 
2015
 
2014
 
2013
Salaries and related expenses
63.8
%
 
64.0
%
 
63.8
%
Base salaries, benefits and tax
52.7
%
 
52.6
%
 
52.9
%
Incentive expense
3.7
%
 
3.5
%
 
3.0
%
Severance expense
0.9
%
 
0.9
%
 
1.1
%
Temporary help
3.6
%
 
3.8
%
 
3.6
%
All other salaries and related expenses
2.9
%
 
3.2
%
 
3.2
%

Office and General Expenses
Office and general expenses primarily include rent expense, professional fees, certain expenses incurred by our staff in servicing our clients and depreciation and amortization costs. Office and general expenses also include costs directly attributable to client engagements, including production costs, out-of-pocket costs such as travel for client service staff and other direct costs that are rebilled to our clients. Production expenses can vary significantly between periods depending upon the timing of completion of certain projects where we act as principal, which could impact trends between various periods in the future.
 
Prior Year Amount
 
Components of Change
 
Total Amount
 
Change
 
Foreign
Currency
 
Net
Acquisitions/
(Divestitures)
 
Organic
 
Organic
 
Total
2014 - 2015
$
1,928.1

 
$
(101.7
)
 
$
3.2

 
$
55.4

 
$
1,885.0

 
2.9
%
 
(2.2
)%
2013 - 2014
1,917.9

 
(19.7
)
 
20.1

 
9.8

 
1,928.1

 
0.5
%
 
0.5
 %
Office and general expenses in 2015 decreased by $43.1 compared to 2014, due to a favorable foreign currency rate impact of $101.7, partially offset by an organic increase of $55.4 and the effect of net acquisitions of $3.2. The organic increase was due to increased general expenses and spending to support new and existing business activity. The organic increase was also attributable to an increase in reserves for certain contingencies, as well as an increase in professional fees, partially offset by lower production expenses related to pass-through costs, which are also reflected in revenue, for certain projects in which we acted as principal that decreased in size or did not recur during 2015. Our office and general expense ratio, defined as office and general expenses as a percentage of total consolidated revenue, decreased in 2015 to 24.8% from 25.6% in 2014.
Office and general expenses in 2014 increased by $10.2 compared to 2013, due to the effect of net acquisitions of $20.1 and an organic increase of $9.8, partially offset by a favorable foreign currency rate impact of $19.7. The organic increase was primarily attributable to increases in adjustments to contingent acquisition obligations as compared to the prior year and increased spending to support new business activity, partially offset by lower production expenses related to pass-through costs, which are also reflected in revenue, primarily in the domestic market. Our office and general expense ratio decreased in 2014 to 25.6% from 26.9% in 2013.
The following table details our office and general expense ratio. All other office and general expenses primarily include production expenses, and, to a lesser extent, depreciation and amortization, bad debt expense, adjustments for contingent acquisition obligations, foreign currency gains (losses), long-lived asset impairments and other expenses.
 
Years ended December 31,
 
2015
 
2014
 
2013
Office and general expenses
24.8
%
 
25.6
%
 
26.9
%
Professional fees
1.6
%
 
1.5
%
 
1.7
%
Occupancy expense (excluding depreciation and amortization)
6.3
%
 
6.7
%
 
7.1
%
Travel & entertainment, office supplies and telecommunications
3.3
%
 
3.4
%
 
3.6
%
All other office and general expenses
13.6
%
 
14.0
%
 
14.5
%


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